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Summary Company Law UoN - Fraudulent & Wrongful Trading
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Veil-Piercing1. General Principles:
a. Ignoring the company’s separate legal personality
b. This does not necessarily mean that limited liability will also be overridden
(Re FG (Films))
c. No veil-piercing where corporate structure was used to evade such rights as
third parties may in future acquire (Adams and VTB Capital)
d. Can pierce veil so as to identify the activities and assets of the corporate
respondents (Wood v Baker)
2. Leading case about corporate veil-piercing (Adams)
a. Single Economic Unit
i. Accepted as general accounts, balance sheets and profit and loss
accounts were treated together (DHN Foods)
o DHN had sufficient interest in the land to justify payment of
compensation:
a. Irrevocable license to occupy and equitable interest via
subsidiary on trust for DHN
o Upadhyay: So, the doctrine is unnecessarily invoked since
other grounds are viable
ii. Did not accept this argument (Woolfson)
iii. ‘We are not concerned with economics but with law’ (Karoon)
iv. ‘Forms no part of English law’ (Linsen International)
v. This would be a new exception to the Salomon Principle (Ord)
vi. A contract in restraint of trade was construed as applying to the
holding company as well as the subsidiaries since the holding
company’s business was handled by its subsidiaries somewhat, had a
real interest in protecting their businesses (Beckett Investment)
vii. Achieving Justice
viii. Court will pierce the veil to achieve justice (Re a Company)
ix. Accords ‘common sense and justice’ (Conway v Ratiu)
x. This argument was rejected (VTB Capital)
b. Sham/Mere façade
i. Accepts ‘mere façade concealing the true facts’ (Woolfson, Adams,
VTB Capital)
ii. Upadhyay:
o ‘Evasion principle’ is less vague/clearer than ‘sham’
o Confusing term as the company itself is not a sham but a
properly incorporated legal entity.
o Issue is that a properly incorporated legal entity is being used
to wrongfully avoid a liability or confer an advantage where it
is not due
c. Agency Law
i. No presumption simply because ownership and control are within a
single individual and must prove on facts (Adams)
3. Limitation of doctrine leading case (Prest)
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