When a company reorganizes itself through a bankruptcy, is it the same company? And if so, is it liable for alleged wrongdoing committed by the previous version of itself?
These are questions raised by General Motors' efforts to dodge hundreds of lawsuits related to a potentially fatal ignition-switch flaw in millions of its older sedans. After receiving a stinging defeat in a federal appellate court this past summer, the automaker is now making a Hail Mary pass to the U.S. Supreme Court to try to convince judges that it has reincarnated into a seven-year-old car company free of liabilities from its previous life.
With potentially billions of dollars' worth of personal and financial injury claims at stake, the Detroit automaker's lawyers argue that allowing these lawsuits to go through would undermine an important aspect of corporate bankruptcy: giving assurance to the buyers of troubled companies that they aren't also buying a whole bunch of unexpected legal headaches.
But in GM's case there was no outside buyer. It essentially bought itself (with taxpayer money) in the wake of the mortgage-lending crisis that tipped the nation into recession and steered the American auto industry into a ditch.
(Score: 2) by tonyPick on Monday December 19 2016, @02:21PM
Aha - that was the term I was looking for - I remember this being a thing around implants & cosmetic surgery a few years ago as well, and reports of this tactic being used to ditch liabilities...
From the daily mail report [dailymail.co.uk] (because I can't find a better link...)
(Score: 0) by Anonymous Coward on Tuesday December 20 2016, @02:36AM
Maybe it's time for extrajudicial punitive actions against said management of such dismissive entities.
(Score: 2) by Nollij on Friday December 23 2016, @07:53PM
In the US, the response to this is called Piercing the corporate veil [wikipedia.org]. It's actually more common than you would think, but not for the reasons you would hope.
Anecdotally: My relative was CEO of a successful company. There were routine claims the company hadn't paid Use tax [wikipedia.org], which is basically sales tax when sales tax itself doesn't apply.
The state department of taxation attempted to pierce the corporate veil and go after him personally on this issue.