Lord Sumption states that lifting the corporate veil is a convenient expression that the courts have granted rights to disregard separate legal personality of incorporation from its controllers (Lexis, 2013). With the increasingly adoption of the form of corporation, there may be some issues about the abuse of the principle (Dignam & Lowry, 2012). This essay will firstly explain part of the statements of Lord Sumption in Prest v Petrol and then providing arguments for and against them based on other cases and judgements.
(解释lift veil) In judgements of Prest case, Lord Sumption refer ‘piercing corporate veil’ to the exceptions to the principles in Salomon case that an owner or controller of a firm should be identified in law by the ownership …show more content…
To illustrate, in Jones v Lipman Mr Lipman signed a contract with Mr Jones to sell his land then he refused to complete the sale by build up a company. Mr Lipman claimed that the land at that moment belonged to the company rather than himself. The judge enforced the contract as the company was just a façade. Other examples such as an employee forming a company to compete with employer’s firm (Gilford v Horne) or majority shareholders setting up another company to force minority shareholders to sell their shares (Re Bugle Press case) can also prove the existence of abusing corporate legal personality did …show more content…
There could be many reasons that entitle the court to pierce the corporate veil such as breach of duty, fraud, or evasion of liability (Sheppard, 2013). Nevertheless a majority circumstances can be summarized as improperly use of corporate form. For example, in Trustor v Smallbone the director breached the fiduciary duty by transferring the money of the firm he serviced into another firm he owned and controlled. Lord Sumption said that if the second company was formed for the receipt of the money from the first company and if the company form was used to conceal the facts, then ‘the veil’ can be lift. It is inappropriate use of corporate form that causing breach of duty and then entitling Sir Andrew Morrit VC to disregard corporate legal personality. Similarly, in Jones v Lipman impropriety was represented by using corporate form to deceive another party in the sale contract and avoiding contractual obligation. Thus piercing corporate veil only to prevent an improper use and only to the extent necessary to do so. This is also the reason for why it is described as a limited
(解释lift veil) In judgements of Prest case, Lord Sumption refer ‘piercing corporate veil’ to the exceptions to the principles in Salomon case that an owner or controller of a firm should be identified in law by the ownership …show more content…
To illustrate, in Jones v Lipman Mr Lipman signed a contract with Mr Jones to sell his land then he refused to complete the sale by build up a company. Mr Lipman claimed that the land at that moment belonged to the company rather than himself. The judge enforced the contract as the company was just a façade. Other examples such as an employee forming a company to compete with employer’s firm (Gilford v Horne) or majority shareholders setting up another company to force minority shareholders to sell their shares (Re Bugle Press case) can also prove the existence of abusing corporate legal personality did …show more content…
There could be many reasons that entitle the court to pierce the corporate veil such as breach of duty, fraud, or evasion of liability (Sheppard, 2013). Nevertheless a majority circumstances can be summarized as improperly use of corporate form. For example, in Trustor v Smallbone the director breached the fiduciary duty by transferring the money of the firm he serviced into another firm he owned and controlled. Lord Sumption said that if the second company was formed for the receipt of the money from the first company and if the company form was used to conceal the facts, then ‘the veil’ can be lift. It is inappropriate use of corporate form that causing breach of duty and then entitling Sir Andrew Morrit VC to disregard corporate legal personality. Similarly, in Jones v Lipman impropriety was represented by using corporate form to deceive another party in the sale contract and avoiding contractual obligation. Thus piercing corporate veil only to prevent an improper use and only to the extent necessary to do so. This is also the reason for why it is described as a limited