“…the Courts Can and Often Do, Draw Aside the Veil. They Can, and Often Do, Pull Off the Mask. They Look to See What Really Lies Behind. the Legislature Has Shown the Way… the Courts Should Follow Suit”.
Law of Business Associations
Assessed Coursework
Question 1 (a) Essay
“…The courts can and often do, draw aside the veil. They can, and often do, pull off the mask. They look to see what really lies behind. The legislature has shown the way… the courts should follow suit”.[1]
When a company is incorporated, it is treated as a separate legal entity, distinct from its promoters, directors, members and employees and hence the concept of the corporate veil, separating those entities from the corporate body has arisen. The nature of corporate personality can be analysed by reference to the celebrated case of Salomon v. A. Salomon & Co. Ltd.[2] Indeed it has been said that Salomon forms a cornerstone of company law and that the separate legal identity of a company stands as a fundamental principle[3] of our English law.[4]
In modern English company law, the principle of the separate legal identity of the company is still firmly adhered to and the principle of Salomon has been upheld over time. However Salomon itself and subsequent judgements have indicated possible exceptions to the separate entity concept. Lord Halsbury recognised the separate entity providing there was: “… no fraud… and no agency and if the company was a real one and not a fiction or a myth”.[5]
It is, however, evident that the courts are prepared to abandon the strict view of Salomon[6] and disregard the principle in certain circumstances in order to reveal human culpability. Some researchers argue that the courts have become increasingly willing to lift the veil,[7] while others suggest that it will only be lifted (or extended) in very specific circumstances - in order to restrain the corporate personality by “reaching it through its shareholders”.[8]
It has also been suggested that all of the common law exceptions to the principle of separate corporate identity are simply symptomatic of the courts attempt to ensure that all parties involved are not disadvantaged by the actions of
Assessed Coursework
Question 1 (a) Essay
“…The courts can and often do, draw aside the veil. They can, and often do, pull off the mask. They look to see what really lies behind. The legislature has shown the way… the courts should follow suit”.[1]
When a company is incorporated, it is treated as a separate legal entity, distinct from its promoters, directors, members and employees and hence the concept of the corporate veil, separating those entities from the corporate body has arisen. The nature of corporate personality can be analysed by reference to the celebrated case of Salomon v. A. Salomon & Co. Ltd.[2] Indeed it has been said that Salomon forms a cornerstone of company law and that the separate legal identity of a company stands as a fundamental principle[3] of our English law.[4]
In modern English company law, the principle of the separate legal identity of the company is still firmly adhered to and the principle of Salomon has been upheld over time. However Salomon itself and subsequent judgements have indicated possible exceptions to the separate entity concept. Lord Halsbury recognised the separate entity providing there was: “… no fraud… and no agency and if the company was a real one and not a fiction or a myth”.[5]
It is, however, evident that the courts are prepared to abandon the strict view of Salomon[6] and disregard the principle in certain circumstances in order to reveal human culpability. Some researchers argue that the courts have become increasingly willing to lift the veil,[7] while others suggest that it will only be lifted (or extended) in very specific circumstances - in order to restrain the corporate personality by “reaching it through its shareholders”.[8]
It has also been suggested that all of the common law exceptions to the principle of separate corporate identity are simply symptomatic of the courts attempt to ensure that all parties involved are not disadvantaged by the actions of