Liabilities of Controlling Shareholders for a Company's Torts: A Reform Proposal

There are inefficiencies and moral objections to controlling shareholders being able to avoid bearing liability for a company's torts while being able to profit from the company's tortious activities. This article argues for a statutory model of liability for controlling shareholders in respect of corporate torts which lead to personal injury or death and puts forward a concrete model for reform, to impose liability on shareholders with control of a company and who can be regarded as being at fault in respect of the company's torts. Existing concepts of control and due diligence in the law are analysed and adapted to provide the basis of the proposed model provisions on liability. The model provides a workable solution that promotes accountability of corporate controllers, while at the same time ensuring that ordinary investors and minority shareholders who do not wield real control over a company are still protected by limited liability.