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14 Harv. Bus. L. Rev. Online 1 (2024)

handle is hein.journals/hblro14 and id is 1 raw text is: THE FALLACY OF COMPLETE CORPORATE SEPARATENESS MARIANA PARGENDLER* Legal discourse about business entities has displayed a logical fallacy regarding the consequences of corporate separateness. A fallacy of equivoca- tion occurs when a term is used with one meaning in the premise and with another meaning in the conclusion. Legal personality undoubtedly provides a separate-in the sense of distinct-nexus for the imputation of legal rights and duties. This, however does not mean that corporations are or should be treated as legally separate-in the sense of insulated-from shareholders in all contexts. Moreover legal insulation between corporations and sharehold- ers for some purposes (e.g., limited liability) does not necessarily entail insu- lation for other purposes (e.g., the application of a contractual or regulatory scheme). In effect, there is significant, if varying, permeability between the legal spheres of corporations and shareholders across different areas of law, including corporate law. Rather than a nonconductor that always isolates the legal spheres of the corporation and related parties, legal personality oper- ates as a semi-permeable membrane. Nevertheless, the recurrent fallacy of complete corporate separateness has obscured and hampered the develop- ment of legal doctrine in several contexts. * Full Professor of Law, Fundagio Getulio Vargas School of Law in Sio Paulo; Global Professor of Law, New York University School of Law. I am grateful to Henrique Arake, George Georgiev, Carlos Portugal Gouvea, Burt Neuborne, Elizabeth Pollman, Mario Schapiro, Richard Squire, Robert Thompson, and participants in the workshop on Hidden Fallacies in Corporate Law and Financial Regulation, the Bocconi-Oxford Junior Scholars Workshop on Corporate Law and Finance, the Droit & Croissance Workshop, and the Wharton Legal Studies Seminar for helpful comments and suggestions.