2. Did the legal doctrine of “limited liability” apply to protect the shareholders of Union Carbide Corporation (U.S.)?

“Limited liability” is a concept where a person’s financial liability is limited to the amount of investment made by the person to a company or a partnership with limited liability. The owners or investors and the company are two separate legal entities. In short, if a plaintiff sues a limited liability company, the plaintiff is actually suing only the company, not the owner or the investors of the company itself, and vice versa. In the case of Bhopal-Union Carbide, the pesticide plant in Bhopal was operated by Union Carbide India Ltd. which was a subsidiary of the Union Carbide Corporation in Connecticut. The U.S. managers considered to close the plant in India due to the incurred $4 million annual losses from the unprofitable plant. However, the Indian city and the state officials requested for the company to remain opened to avoid thousands of unemployment. What happened then in December 1984 caused 2,000 casualties and the injuries of 200,000 others. What actually caused the accident was the poisonous leakage of methyl isocyanate gas, a volatile and highly lethal chemical used to manufacture pesticides. When a whopping amount of more than $35 billion in lawsuits have been filed against the company, described to be only about $200 million, the company’s stock plummeted. The stakeholders were furious as they were not informed of how highly risky the plants in India are. This brings us to the question: were they liable for the accident that occurred. Applying the legal doctrine of “limited liability”, when the lawsuits were filed against Union Carbide Corporation, the stakeholders were not held liable in the account of the accident. This is because the company and the stakeholders are two very separate legal entities. The stakeholders’ financial liability is limited to the fixed amount of which they have invested in the company. Their personal financial assets would not be taken into account for the payment of the compensation agreed upon court order. The stakeholders could be held liable if it was something that they personally caused to happen. However, in this case they had nothing to do for the accident to happen thus making them not liable. In conclusion, the legal doctrine of “limited liability” did apply to protect the shareholders of Union Carbide Corporation (U.S.).

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