Page 66 - Albanian law on entrepreuners and companies - text with with commentary

respect to the formula ‘the amount necessary’ to achieve the company objective, Article 1076
takes for granted that there is a lot of discretion for founders and managers with respect to
‘sufficient capitalization’. So here the rules on ‘reasonable management’ of Articles 98 and
163 come to the fore.

5. This is where Article 16 (1) comes in. Its cases concern the particularly serious
fraudulent abuse of the company form as such. That breach of duty implies the refusal to
acknowledge the enhanced responsibility conferred by the concession to use legal personality
and limited liability. Instead the intention is to use this very set up fraudulently and for the
purpose of securing unjust profits or for causing to third parties a loss of property.
Compensation of damages based on limited liability and legal personality would in this case
create a kind of ‘premium’ for the abusive action. Instead, the piercing-the-veil mechanism
recognizes that the abuse regards the very principles that the company law system is based on
and adequately compensates the abuse by removing its concessions and advantages.
Consequently, this concerns not only the management but also members and shareholders
who are able to dominate the companies involved. But, on the other hand only those members
and shareholders are meant here. An average member or shareholder without any chance to
influence the management of the company cannot be the target of any piercing-the-veil
charges.

6. The abuse of the company form for illegal purposes of Article 16 (1) a) has a kind of
‘catch-all’ function here: the other two cases are rather examples for this general abuse of
form (or ‘position’). Based on the aforementioned piercing-the-veil standard, Albanian courts
are free to recognize other cases where a principle abuse of form is involved. So we interpret
the list of Article 16 (1) as an open list, not as a closed list and consider it to be adapted
through the application of the general rule expressed in Article 16 (1) a) , in the light of the
implementation principles discussed by Comments before Article 14, on pages 46 et seq.

7. Treating the companies’ assets as one’s own assets” (Article (1) b) derives from a
classical set of cases developed by the German piercing-the-veil jurisprudence. The main
argument here is that legally separated company assets are dedicated to cover the obligations
towards the company’s creditors. They are not at the free disposal of the members but bound
by this objective. If members strip a company of its assets without considering this objective
and, by doing so, remove the company’s capacity to cover its obligations as against creditors,
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this is to be considered an abuse of the legal form (of the LLC).

8. Article 16 (1) c) basically continues this thought and provides for personal liability in
case of ‘undercapitalization’ of companies with limited liability; that is, if members,
shareholders or the management “fail, with respect to the type of activities, to ensure that the

95 See the collection of the jurisprudence of the Federal Court (Bundesgerichtshof—BGH) in civil law rulings, volume
151 (2002), p. 181 et seq. (BGHZ 151, 181 et seq.). As there is no written piercing-the-veil rule in German Company
Law, the Federal Court applies the liability provision for partnerships—it corresponds to Article 40 (1) of the new
Albanian Company Law—accordingly, if the piercing-the-veil conditions are met.
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