My Best Work
3
Lifting the veil
SUMMARY
Introduction
Statutory examples
Veil lifting by the courts
Classical veil lifting, 1897–1966
The interventionist years, 1966–1989
Back to basics, 1989–present
Tortious liability
Parent company personal injury tortious liability
Commercial tort
The costs/benefits of limited liability
Introduction
3.1
Book 7a.indb 31
You may not unnaturally wonder at this point what the phrase ‘lifting the veil’ is about. It refers to the situations where the judiciary or the legislature have decided that the separation of the personality of the company and the members is not to be maintained. The veil of incorporation is thus said to be lifted. The judiciary in particular seem to love using unhelpful metaphors to describe this process. In the course of reading cases in this area you will find the process variously described as
‘lifting’, ‘peeping’, ‘penetrating’, ‘piercing’ or ‘parting’ the veil of incorporation. In a nutshell, having spent the whole of the last chapter emphasising the separateness of corporate personality, we now turn to those situations where for various reasons that separateness is not maintained.
8/14/2008 9:08:31 PM
32 | Lifting the veil
3.2
While some of the examples of veil lifting involve straightforward shareholder limitation of liability issues many of the examples involve corporate group structures.
As businesses became more adept at using the corporate form, group structures began to emerge. For example Z Ltd (the parent or holding company) owns all the issued share capital in three other companies—A Ltd, B Ltd and C Ltd. These companies are known as wholly owned subsidiaries (see CA 2006, s 1159(2)). Z
Ltd controls all three subsidiaries. In economic reality there is just one business but it is organised through four separate legal personalities. In effect this structure allows the legal personality of the parent company to avail itself of the advantages of limited liability.
Lifting the veil
SUMMARY
Introduction
Statutory examples
Veil lifting by the courts
Classical veil lifting, 1897–1966
The interventionist years, 1966–1989
Back to basics, 1989–present
Tortious liability
Parent company personal injury tortious liability
Commercial tort
The costs/benefits of limited liability
Introduction
3.1
Book 7a.indb 31
You may not unnaturally wonder at this point what the phrase ‘lifting the veil’ is about. It refers to the situations where the judiciary or the legislature have decided that the separation of the personality of the company and the members is not to be maintained. The veil of incorporation is thus said to be lifted. The judiciary in particular seem to love using unhelpful metaphors to describe this process. In the course of reading cases in this area you will find the process variously described as
‘lifting’, ‘peeping’, ‘penetrating’, ‘piercing’ or ‘parting’ the veil of incorporation. In a nutshell, having spent the whole of the last chapter emphasising the separateness of corporate personality, we now turn to those situations where for various reasons that separateness is not maintained.
8/14/2008 9:08:31 PM
32 | Lifting the veil
3.2
While some of the examples of veil lifting involve straightforward shareholder limitation of liability issues many of the examples involve corporate group structures.
As businesses became more adept at using the corporate form, group structures began to emerge. For example Z Ltd (the parent or holding company) owns all the issued share capital in three other companies—A Ltd, B Ltd and C Ltd. These companies are known as wholly owned subsidiaries (see CA 2006, s 1159(2)). Z
Ltd controls all three subsidiaries. In economic reality there is just one business but it is organised through four separate legal personalities. In effect this structure allows the legal personality of the parent company to avail itself of the advantages of limited liability.