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Corporations are not supposed to be able to have no ultimate beneficial owners. If A Inc. holds 100% of B Group, B Group is not supposed to be able to own 100% of A Inc.

How effectively are these dead-end loops in corporate ownership prevented, especially when the involved entities are in different jurisdictions that might not communicate? If such a loop is discovered to have occurred, how is it usually unwound, and by whom? Who ends up with the assets?

This isn't about whether or not the arrangement is allowed, it is about what is done about it if it manages to arise or how it is prevented from arising.

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Usually, the only reason to set up an "ownerless" corporation is to set up a non-profit. Non-profit corporations can have self-perpetuating boards and are very similar to charitable trusts. If it ends up without any board members and has a self-perpetuating board, any person affected by the corporation or a suitable government representative (in the U.S., usually a state attorney general in the place of incorporation) can apply to a court to have new board members appointed.

In a "for profit" context, this generally doesn't happen because the people investing in the company want to be able to profit from it and/or obtain a return of their investment. So, the question is largely hypothetical in that case.

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  • An example of why this might occur in a for-profit company is if a company has performed illegal acts, or is planning to perform illegal acts, which might confer legal responsibility on an owner.
    – isaacg
    Jul 12 at 15:32
  • @isaacg This example doesn't work. Such an arrangement wouldn't do anything more to shield an owner/founder from legal responsibility for illegal acts than an ordinary plain vanilla C-corporation owned by passive shareholders. When individual owners of a corporation or LLC have personal responsibility (civil or criminal) for illegal acts, it is as a result of their signing separate guarantees or being personally involved in the illegal acts, not merely because they are owners of the firm.
    – ohwilleke
    Jul 12 at 15:51
  • Suppose Bob commits a crime, using company X as a vehicle to commit that crime. If Bob or one of Bob's associates owns company X, this could make it easier for investigators to discover that Bob committed the crime. To make it harder for investigators, criminals often set up chains of shell corporations to obscure ownership. If it was possible to make the corporations self-owning, that would obscure things even further. I think I used the wrong terminology in my prior comment, but this was the scenario I was thinking of.
    – isaacg
    Jul 12 at 16:00
  • @isaacg Perhaps, but because ownership of a corporation is not a matter of public record, and Bob would presumably have some involvement either on the board or as an officer or employee or in a transaction with the corporation, it would only be the tiniest speed bump of difference, and the weird structure would actually be a red flag encouraging investigators to look deeper into the facts making it more likely that Bob would be caught. I can see how a misguided legally illiterate or non-savvy Bob might mistakenly think this would help, but it would probably hurt more than it would help.
    – ohwilleke
    Jul 12 at 16:04

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