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LLB Notes Company Law Essay - Company Law: Separate Corporate Personality and Veil Lifting
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- Company Law
LLB Notes Company Law Essay - Company Law: Separate Corporate Personality and Veil Lifting
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Company Law: Separate CorporatePersonality and Veil Lifting
Corporate 'veil' - ANS the barrier that SCP (separate corporate personality) brings
down between the company and shareholders has come to be referred to as the
corporate 'veil'.
'Peeping behind' or 'lifting' the veil - ANS the courts will often look behind the veil - i.e.
take some account of the economic realities and examine who the shareholders are
before reaching their decision.
'Piercing' the veil - ANS when the courts disregard SCP and identify companies with
their shareholders.
Piercing the corporate veil means... - ANS making the shareholders of a company
liable in certain situations
It can also sometimes mean liability for the Directors
It goes against the fundamental principle of SCP.
Veil lifting/piercing tends to arise in situations of: - ANS Small private companies
Groups of companies
How the veil may be pierced, lifted etc - ANS By statute
By common law/judiciary
By alternative remedy (e.g. tort, agency, trust)
Statutory Veil Lifting -Claims against Directors for fraudulent trading - ANS S213 IA 86
If it appears to the court that "any business of the company has been carried on with
intent to defraud creditors of the company or of any other person, or for any fraudulent
purpose", it may order that "any persons who were knowingly parties to the carrying on
of the business in the manner above-mentioned are to be liable to make contributions (if
any) to the company's assets as the court thinks proper".
Statutory Veil Lifting -Claims against Directors for wrongful trading - ANS S214 IA 86
Enables the court to make a declaration, when a company has gone into insolvent
liquidation, that a former director is liable to make a contribution to the company's
assets.
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