What is the difference between economic reality and legal reality?
Ontario, Canada
The following excerpt is from Brockville Investments Ltd. v. Kertzer, 2004 CanLII 23050 (ON SC):
[30] This submission shows the difference between economic reality and legal reality. The economic reality of the mail-order business was a single economic enterprise. But the legal reality was separate corporate entities. And the rule in Foss v. Harbottle is a corporate law rule, not an economic rule. A parent company that owns all the shares of its subsidiairies may exercise complete and constant control over them. That control, however, does not clothe the parent with the right to sue for the subsidiairies.
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