On the contrary, he may enrich himself by extracting assets from it, leaving the entity and its creditors empty-handed. If a shareholder impoverishes the legal entity under his control, he does not by definition impoverish himself. This opens the door to opportunistic behavior. Unlike in the case of an individual, the holder of the rights to a legal entity’s assets (the intangible entity itself) by definition differs from the persons actually exercising control over it (such as directors and controlling shareholders). However, that underlying basic trust is hard to reconcile with the particular nature of legal entities (such as most companies).
This principle of autonomy is based on a basic trust that every person will manage his estate in good faith, as he himself will primarily bear the consequences of his mismanagement. The pauliana constitutes an important exception to each person's autonomy over his estate.
#Actio pauliana full
It is a remedy (i) of a creditor (ii) against the beneficiary (iii) of an act committed by his debtor (iv) with the intent or knowledge of (v) preventing full recovery of the creditor’s claim, provided that (vi) either the transaction was gratuitous or the beneficiary acted in bad faith. The pauliana exists under general civil law as well as under bankruptcy law, in which case it is exercised by the bankruptcy trustee. In Continental legal traditions, this legal remedy is known as the (actio) pauliana. Under certain conditions, however, a court can allow the creditor to set aside the transaction by which his debtor caused of exacerbated his own insolvency. by transferring assets to a friend for free. A debtor may elude his creditor by making himself insolvent, e.g.
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