Hong Kong Baptist University
Bachelor of Commerce
(Honours) in Accountancy
BUS3230 Company Law
Tutorial Questions to Lecture 3 Corporate Personality
Nancy controlled three companies. Each company in turn owned a ship. Supplies to the three ships were provided by the same creditor, Bunker Trading Ltd. Two ships ordered supply of goods from Bunker and failed to pay for the price after delivery. Bunker sued the two companies holding the ships and obtained judgment against them, but was unable to enforce the judgments. Bunker eventually arrested the third ship to enforce the judgments against two other companies on the ground that all three companies were owned by the same person, Nancy. Advise Nancy
The case here focuses on the doctrine of lifting the corporate veil. Lifting the veil of incorporation means that in certain circumstance the courts can look through the company to the identity of the shareholders. The usual result of lifting the veil is that the members of directors become personally liable for the company's debts.
Under some circumstances, the separate corporate personality will be disregarded. This is an incongruous area of law in which it is hard to generalize a trend or a rule. The challenge is to attempt to come up with a theory to justify lifting of the corporate veil and to account for the case law. In general, in order to lift a corporate veil, we need to show absolute control by a member of the company (the company is mere alter ego of the shareholder).
The first issue is whether to pierce the corporate veil on the ground that three companies were owned by the same person.
Nancy created very complicated corporate structure (one ship company structure) but there was testimony in trial that she treated the ships as her won. Bunker was a bunker supplier to the two ships but received no payments. Bunker sue the two companies holding the ships and obtained judgment against...
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