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What Is Corporate Liability?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 14 October 2014
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Corporate liability is an assessment of the activities that a corporation may be held legally liable for in a court of law. Under the law, individual people are considered liable for their actions, but a corporation is an entity, not a person, making it somewhat more challenging to make decisions about legal liability for corporations. The law in terms of corporate liability varies worldwide and some critics have claimed that it has become significantly diluted in some regions as a result of pressure from corporations that want to avoid legal liability.

Liability can be a topic of discussion in both civil and criminal cases. Debates about corporate liability surround situations when corporations may be considered at fault for the activities of their employees, including both actions and omissions. Corporations do have human agents who can be held accountable for things like fraud, environmental violations, and other activities that violate the law. Individual employees can also be brought into court if they are directly responsible for violations of the law.

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If a corporation is liable, it can face fines and damages. This commonly occurs with situations like violations of environmental regulations, where government agencies levy fines on corporations that pollute or commit other environmental infractions, and in product liability cases where people are injured or killed by something a corporation sells. It is possible that key figures involved in a corporation can be held accountable in court and sentenced to jail time in some cases, as seen when executives conspire to commit fraud. In these cases, however, it is not the corporation itself that is liable, but the individual employees who committed the crime.

One of the reasons people incorporate is because they want to limit liability by taking advantage of the way the law handles corporate liability. Governments recognize that penalizing a corporation with fines and other measures can have the effect of punishing people who are innocent, like stockholders and employees. This must be weighed when calling a corporation to account for business practices and other activities.

Liability law can become extremely complex. Lawyers who specialize in this topic are usually called upon in cases where corporate liability is in question to ensure that all aspects of a case are considered, while decisions are made about how to pursue it. Governments agree that some checks are needed on the activities of corporations to protect the general public, their stockholders, their employees, and the environment, but establishing the limits of that liability can be challenging.

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Discuss this Article

anon273053
Post 2

I sued a company and they failed to pay the judgment granted for my case. The company was not paying their employees for the time worked and was terminating the employees.

The owner has now opened a new company and is not paying those employees, either. The company I'm suing is now out of business. Can I sue the new company since I have an active judgment and the same person is the owner of the new company?

anon188966
Post 1

I strongly feel that the erring corporation should be brought before the law. Many states do not recognize corporate liability at all. While some states do recognize this concept, only limited liability is attributed on the corporation. This is not without reasons. The corporation, being an entity cannot be imprisoned. It is also argued that corporations, being non-human, do not possess mens rea which is one of the elements of crime.

Nevertheless it is submitted that if a corporation commits a crime, affecting the public at large, it should be brought to book. Necessary amendments should be brought into the legislation to this effect. Otherwise, crimes will be committed in the name of the corporation and the persons committing the crime will escape liability on account of this.

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