As corporate activities generate ever‑greater societal risks, legal scholars and practitioners argue that the courts must reshape the traditional shield of limited liability so that those who steer companies can be held accountable for the damage they cause.
Why limited liability needs re‑examination
The long‑standing principle that shields shareholders’ personal assets from corporate lawsuits has helped attract investment and fuel economic growth. By transferring the burden of a firm’s misconduct from its owners to the broader public, the doctrine has encouraged capital to flow into private enterprise. Yet the same protection allows those who control a company – whether through shareholding or senior management – to evade responsibility for harms that extend far beyond the firm’s balance sheet.
When the risk of a corporate act becomes irreversible, such as the emission of persistent chemicals or the deployment of unchecked artificial intelligence, the current legal framework offers little incentive for decision‑makers to weigh the wider consequences of their actions. The result is a pattern of “externalising” costs onto communities, governments and the environment, undermining the public interest.
DuPont’s PFOA legacy illustrates the stakes
One of the most cited illustrations is the case of DuPont, which between 1951 and 2013 discharged perfluorooctanoic acid (PFOA) – a non‑degradable “forever” chemical used in Teflon production – into the environment. Internal documents reveal that by 1984 senior executives were aware that PFOA persisted in human blood and posed serious health hazards, yet they chose to double production, believing the profit margin outweighed any eventual sanction.
Despite the clear knowledge of the danger, the executives responsible for the decision were never subject to the regulatory settlements or litigation that later confronted the company. The firm has since leveraged its expertise to become a leading supplier of water‑filtration technology that removes PFOA, reaping substantial profits while the original harm remains unaddressed.
Courts in various jurisdictions have occasionally “pierced the veil” of corporate identity to impose liability on the individuals who directed the wrongdoing, but the legal doctrine remains inconsistent. Legislators have also intervened in specific sectors – such as tax, health and safety, consumer protection and environmental regulation – to disregard the separate legal personality of a company when public interest demands it. The British Columbia Law Institute has noted that both courts and legislatures have yet to articulate a coherent, repeatable approach to veil‑piercing.
Legal developments and the UN climate‑litigation tally
According to a United Nations report, as of June 2025, 3,099 climate‑related lawsuits had been filed across 55 national jurisdictions and 24 international courts or quasi‑judicial bodies. Many of these actions centre on corporate duties, liability and compensation, signalling a growing willingness of the judiciary to confront the systemic risks posed by large organisations.
Legal scholars argue that a narrowly defined exception to limited liability for “controllers” – those with full access to corporate information and the power to shape conduct – would be a pragmatic response to these emerging threats. By imposing liability on the individuals best positioned to mitigate systemic risks, the law could deter reckless behaviour and align corporate incentives with broader societal goals.
Path forward for Canadian law
Creating a clear statutory framework to hold controllers accountable would eliminate legal uncertainty and strengthen the economy by removing the massive incentives to externalise risk. However, reform of this nature has historically struggled to attract political support in Canada, where corporate law changes rarely become a priority for policymakers.
Fortunately, the common‑law system is evolving incrementally. Recent case law demonstrates a gradual willingness to extend liability beyond the traditional corporate veil, especially where the public interest is at stake. The prospect of judicial innovation, therefore, offers a viable avenue to address the most pressing corporate risks without waiting for reluctant legislative action.
Why it Matters
Allowing the judiciary to adapt limited liability to target the true decision‑makers would close a critical loophole that currently shields the architects of corporate harm from accountability. This shift is essential to curb the escalating externalisation of risk that threatens public health, the environment and long‑term economic stability, ensuring that those who profit from corporate activity also bear the corresponding responsibilities.