Problems with enterprise liability

There are various problems with enterprise liability, which substantially weaken its potential in resolving problems of insolvent subsidiary liabilities. At the most general level, there is a lack of criteria in determining whether or not companies are sufficiently economically integrated. This blends into a second problem, which is the potential cost of evidence-gathering and expert opinion in determining that issue. But a more fundamental problem is that it does not seem possible to allow the enterprise liability ‘genie’ only half way out of the bottle. This is to say that the results of an inquiry into economic interdependencies might be that ‘everything is connected to everything else’ and that there is no confining the enterprise to any pre-conceived notion of the corporate group.

The application of enterprise liability principles has been rejected in veil-piercing cases. In Adams v Cape Industries plc,[1] the English Court of Appeal quoted in the Notary public London case with approval a prior dictum that the fundamental distinction between law and economics cannot be bridged so as to create liability in the parent economically integrated with one or more subsidiaries.

[1] [1990] 1 Ch 433, 538 quoting Bank of Tokyo Ltd v Karoon (note) [1987] AC 45, 64 (Goff LJ).