Comp Law Veil
Chapter 4 Lifting the veil of incorporation
Contents
Introduction 41 42 43 Legislative intervention Judicial veil lifting Veil lifting and tort Reflect and review 36 37 39 41 43
page 36
University of London External System
Introduction
As we observed in Chapter 3 the application of the Salomon principle has mostly (remember Mr Macaura) beneficial effects for shareholders. The price of this benefit is often paid by the company’s creditors. In most situations this is as is intended by the Companies Acts. Sometimes, however, the legislature and the courts have intervened where the Salomon principle had the potential to be abused or has unjust consequences. This is known as ‘lifting the veil of incorporation’. That is, the courts or the legislature have decided that in certain circumstances the company will not be treated as a separate legal entity. In this chapter we examine the situations where the legislature and the courts ‘lift the veil’.
Learning outcomes
By the end of this chapter and the relevant readings, you should be able to: u u
describe the situations where legislation will allow the veil of incorporation to be lifted explain the main categories of veil lifting applied by the courts.
Essential reading
¢ ¢
Dignam and Lowry, Chapter 3: ‘Lifting the veil’. Davies, Chapter 8: ‘Limited liability and lifting the veil at common law’ and Chapter 9: ‘Statutory exceptions to limited liability’.
Cases
¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢
Gilford Motor Company Ltd v Horne [1933] Ch 935 Jones v Lipman [1962] 1 WLR 832 D.H.N. Ltd v Tower Hamlets [1976] 1 WLR 852 Woolfson v Strathclyde RC [1978] SLT 159 Re a Company [1985] 1 BCC 99421 National Dock Labour Board v Pinn & Wheeler Ltd [1989] BCLC 647 Adams v Cape Industries plc [1990] 2 WLR 657 Creasey v Breachwood Motors Ltd [1992] BCC 638 Ord v Belhaven Pubs Ltd [1998] 2 BCLC 447 Williams v Natural Life Health Foods Ltd [1998] 2 All ER 577 Lubbe and Others v Cape Industries plc [2000] 1 WLR 1545.
Contents
Introduction 41 42 43 Legislative intervention Judicial veil lifting Veil lifting and tort Reflect and review 36 37 39 41 43
page 36
University of London External System
Introduction
As we observed in Chapter 3 the application of the Salomon principle has mostly (remember Mr Macaura) beneficial effects for shareholders. The price of this benefit is often paid by the company’s creditors. In most situations this is as is intended by the Companies Acts. Sometimes, however, the legislature and the courts have intervened where the Salomon principle had the potential to be abused or has unjust consequences. This is known as ‘lifting the veil of incorporation’. That is, the courts or the legislature have decided that in certain circumstances the company will not be treated as a separate legal entity. In this chapter we examine the situations where the legislature and the courts ‘lift the veil’.
Learning outcomes
By the end of this chapter and the relevant readings, you should be able to: u u
describe the situations where legislation will allow the veil of incorporation to be lifted explain the main categories of veil lifting applied by the courts.
Essential reading
¢ ¢
Dignam and Lowry, Chapter 3: ‘Lifting the veil’. Davies, Chapter 8: ‘Limited liability and lifting the veil at common law’ and Chapter 9: ‘Statutory exceptions to limited liability’.
Cases
¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢
Gilford Motor Company Ltd v Horne [1933] Ch 935 Jones v Lipman [1962] 1 WLR 832 D.H.N. Ltd v Tower Hamlets [1976] 1 WLR 852 Woolfson v Strathclyde RC [1978] SLT 159 Re a Company [1985] 1 BCC 99421 National Dock Labour Board v Pinn & Wheeler Ltd [1989] BCLC 647 Adams v Cape Industries plc [1990] 2 WLR 657 Creasey v Breachwood Motors Ltd [1992] BCC 638 Ord v Belhaven Pubs Ltd [1998] 2 BCLC 447 Williams v Natural Life Health Foods Ltd [1998] 2 All ER 577 Lubbe and Others v Cape Industries plc [2000] 1 WLR 1545.