Archive of Journal - Financing

Financing – scientific magazine for economy

ISSUE 2022, No. 3, Article 4, Year of publication: 13, September, 2022
The Role of the ‘Piercing the Corporate Veil’ Institute in Protecting the Interests of Creditors in the (Pre)bankruptcy Position of the Company – Comparative legal presentation


Stefan Blagojević, MSc*

*Finrar d.o.o. Banja Luka



In the simplest terms, „piercing the corporate veil” institute in Serbian law is an exception to the otherwise absolute rule of limited liability of members of the limited companies. Namely, the institute in question transforms their responsibility towards the creditors of the limited company from limited to unlimited, which is the specificity of this institution, since under regular circumstances the members (owners) of the limited company are liable only up to the amount of their capital stake in the company. The intention of the legislator when introducing the institute in question into our legislation is primarily motivated by the desire to threaten the „sovereignty” of the standard of limited liability of members of limited company for the obligations of the limited company, so that they, by the force of the authority of the law, due to their own non-compliance with that standard and the autonomy of their limited company as a separate legal entity, can be brought to justice of „unlimited liability” for the obligations of their company towards their company’s creditors, which also provides increased security for creditors and additional sanctions for members of the limited company. There is no doubt that the principle of limited liability is a barrier to the unlimited liability of a member of a limited company for the obligations of his company, but only under the condition of the existence of legal and property independence of the company in relation to its creditors and debtors, which again is very often the subject of abuse by company members through the management system and controls on a proprietary basis, all to the detriment of creditors. The mentioned types of abuses intensify when the company is on the very „threshold” of bankruptcy, since the business decisions made by the members (owners) of the limited company in such circumstances are primarily based on the protection of their interests, not the interests of creditors. In legal theory, this close encounter between company law and bankruptcy law is often called „no man’s land”, which highlights the existence of a certain legal gap and the current incompetence of these two branches of law to use their legal mechanisms, at a time when all relevant circumstances point to the imminent opening of bankruptcy proceedings over the company, to ensure the protection of creditors. The biggest problem manifests itself precisely in the fact that the bankruptcy of the company has not yet been initiated, which makes it impossible to apply the rules of the bankruptcy procedure and thereby protect the interests of creditors, and the only thing left is to rely on the provisions of company law, which nevertheless, in their essence, provide greater protection to the interests of the members (owner) of the limited company. In addition to the mentioned problem, in this paper we will refer to the phenomenon of „phoenix” companies, which can lead to the abuse of limited liability and the manipulation of the goals of bankruptcy, in order to avoid paying obligations to creditors. In accordance with the above, we decided, both theoretically and practically (through comparative judicial practice and laws), to devote ourselves to the analysis of this issue, which has recently been increasingly in the focus of scientific and professional attention.

Keywords: institute of legal personality, limited and unlimited liability, protection of creditors, „phoenix” company

DOI: 10.7251/FIN2203045B

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