1. Corporate law Intra-enterprise liability Last updated 30 Nov 09 Latin American Law

3. Who is …

4. Today’s topics Protection of foreign investment –Separation of assets / liability Disregard of separate incorporation Intra-enterprise liability: piercing factors Joint/several or secondary liability –Administration of insolvent company Public policy grounds Use of foreign group’s assets Confiscation? … effectively raised serious questions about the validity of constitutional protections of economic activity, the proper role of government in business and society, and more broadly, the ideas of separation of powers and stare decisis. Michael Lennox

5. “unified socio-economic unit” … Juan Peron “The idea that ‘the public interest’ supersedes private interests and rights can have but one meaning: that the interests and rights of some individuals take precedence over the interests and rights of others.”

6. Model for borrowing Gain perspective Discover truths Impose / power Value of knowing other legal systems Lat Am vs multinationals … why? Stephanie Richeter / Dave Cardamone / Jeff Servas

8. In re Deltec Argentina Supreme Court (1973)

10. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe

11. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe Assets = $36.8 Liabilities = $52 Government creditor = $23 Private creditors = $18 Intracorporate = $11

12. “unified socio-economic unit” … Juan Peron “The idea that ‘the public interest’ supersedes private interests and rights can have but one meaning: that the interests and rights of some individuals take precedence over the interests and rights of others.”

13. The change of vote from unconstitutional in Carter Coal to constitutional in West Coast Hotel by Justice Owen Roberts has been called “the switch in time that saved nine.” Jeff Servas

14. How does “scope of group” relate to capitalism …

15. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe

16. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe

17. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe

18. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe

19. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe

20. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe

21. Shareholders Holding Company Lat Am Multinational Corporation US Colombia Argentina Holding Mexico OperatingExport Europe

22. Argentina Business Organizations Act Article 54: Stockholders shall become fully liable for the obligations of the company when they use the company form to act illegally, inconsistently with the company’s stated business purpose, or to the detriment of third parties. * * * Model Business Corporation Act § 6.22(b): A shareholder of a corporation is not personally liable for the acts or debts of the corporation except that he may become personally liable by reason of his own acts or conduct. What factors in piercing?

23. Piercing factor Thompson (1985 study*) Argentina Sup Court (1973) Indiv vs corp 44.4% vs. 23.8%* “unified socio- economic unit” Tort vs contract 35.7% vs. 31.1%* Domination 57.0% “circumscribed sub freedom” Lack formalities 66.9% “scrupulously observed” Inadequate $$ 73.3% “intra-group prices higher / funds withdrawn” Confusion 85.3% Parent describes as “our property” Misrepresentation 91.6% Liability of a Parent Corporation for the Obligations of an Insolvent Subsidiary Under American Case Law and Argentine Law, Hector Jose Miguens, 10 Am. Bankr. Inst. L. Rev. 217 (Spring 2002).

24. Argentina reconsiders foreign investment …

25. Foreign Investment Act (1973): “foreign investor liable for local company’s obligations” Foreign Investment Law (1976): transactions between foreign investor and local company “shall be considered as transactions between independent parties … when in accordance with normal business practices” What’s changed? How do investors feel?

26. Shareholders Swift & Co Deltec Int’l Multinational Corporation US Deltec Argentina Cia-SwiftEsperanza Europe Minority SHs

27. Sacrifice property rights in the public interest …

28. In late 2008, the Siemens International and a host of its subsidiaries were fined over $1.6 billion in the United States under its Foreign Corrupt Practices Act (FCPA). Michael Lennox

29. Shareholders Swift & Co. Deltec Int’l Multinational Corporation US Colombia Deltec Argentina Mexico Cia-Swift10 others Europe Was bankruptcy court’s administration a taking?

30. NY Court (1974): “The determination in Argentina that plaintiff is Bankrupt because it is in corporate group, where one member is insolvent, is not in conformity with American law … and may amount to a confiscation of property.” Dave Cadamone

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32. Andean Pact, the Cartagena Agreement (1969): In addition to establishing a free trade regime, it proclaimed “one of the fundamental objectives of the common regime must be to strengthen the national enterprise.” Since the Argentineans believed that foreign companies hurt domestic companies, they handicapped foreign companies. Tim Corprew