Piercing the Corporate Veil Essay

2801 Words Feb 2nd, 2008 12 Pages
One of the most uncertain areas in company law today is the situation in which a court is willing to set aside the separate legal personality of a company. Separate legal personality i.e. where a company is regarded by the courts as a legal person with its own rights and responsibilities and that it is capable of owning property amongst other things. Laffoy J stated in Fyffes Plc v Dcc Plc & Ors ,

"It has been a fundamental principle of Irish company law since the decision of the House of Lords in Salomon v. Salomon and Company Limited [1897] A.C. 22 that a company registered under the Companies Acts is an artificial legal entity separate and distinct from the members, whether natural or corporate persons, of which it is composed."
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Adams v. Cape Industries is the prime example of opportunist companies hiding behind the corporate veil. Here the Court of Appeal refused to lift the corporate veil and expose the defendants as the controlling mind and will behind a complex arrangement, which allowed the hazardous material to be marketed overseas using subsidiary companies. L.J Slade in his judgment in this case said that a member of a corporation is allowed to use company law in a way so,

"...as to ensure that the legal liability (if any) in respect of future particular activities of the group ...will fall on another member of the group rather than the defendant company."

The courts in the hope of stopping the exploitation of the jurisdiction, has resulted in a limited range of exceptions to the principle espoused in Salomon to stop extreme abuses of the doctrine of separate legal personality.
There were limited circumstances stated in the Salomon case, in which the courts would look behind the corporate veil. These were situation where there was,

"…no fraud and no agency and if the company was a real one and not a fiction or a myth."

When the corporate veil is lifted, the controllers of the company will be made personally liable for the actions of the company. The situations when the corporate veil will be lifted are very narrow and have not changed in many years.
The main circumstances in which the courts will pierce the corporate veil,
1.

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