1. Justifications for veil piercing
In this section 2, the reasons for affirming the stand of this paper are critically assessed, which relate to the purposes and the factual nature of this doctrine.
1.1 Veil piercing is not the mess for its purposes of serving justice
The first reason for justification of veil piercing is its purposes of eliminating injustice. To clarify this, the paper proceeds as follows. Three roles of veil piercing are first outlined, in which relevant cases are discussed to obtain an increased understanding of the purpose in question. Subsequently, the debate amongst the judges and academics in relation to this function as well as the author’s opinion are respectively presented.
(i) Tackling abuse of corporate personality to avoid pre-existing obligations
There are two classic cases, which are discussed immediately below, exemplifying veil piercing …show more content…
Thus, he did not violate the non-compete clause in the previous employment contract. However, the Court of Appeal rejected Mr Horne’s contention on the grounds that his use of company was a “sham”.
In Jones v. Lipman, Mr Lipman and Mr Jones entered into a house sale and purchase transaction. Notwithstanding, Mr Lipman then changed his mind and refused to sell the house. Accordingly, he bought a shelf company, to which he conveyed the property. In the judgement, the court rejected his corporation on the basis that the company was used as a sham in order to avoid the execution of the transaction with Mr Jones.
The above two cases suggest that while Salomon decision is the corner stone of the modern company law, the availability of corporate personality may be exploited by those who want to undertake improper actions. Thus, such extraordinary privilege of separate legal entity should be prevented by piercing the corporate
In this section 2, the reasons for affirming the stand of this paper are critically assessed, which relate to the purposes and the factual nature of this doctrine.
1.1 Veil piercing is not the mess for its purposes of serving justice
The first reason for justification of veil piercing is its purposes of eliminating injustice. To clarify this, the paper proceeds as follows. Three roles of veil piercing are first outlined, in which relevant cases are discussed to obtain an increased understanding of the purpose in question. Subsequently, the debate amongst the judges and academics in relation to this function as well as the author’s opinion are respectively presented.
(i) Tackling abuse of corporate personality to avoid pre-existing obligations
There are two classic cases, which are discussed immediately below, exemplifying veil piercing …show more content…
Thus, he did not violate the non-compete clause in the previous employment contract. However, the Court of Appeal rejected Mr Horne’s contention on the grounds that his use of company was a “sham”.
In Jones v. Lipman, Mr Lipman and Mr Jones entered into a house sale and purchase transaction. Notwithstanding, Mr Lipman then changed his mind and refused to sell the house. Accordingly, he bought a shelf company, to which he conveyed the property. In the judgement, the court rejected his corporation on the basis that the company was used as a sham in order to avoid the execution of the transaction with Mr Jones.
The above two cases suggest that while Salomon decision is the corner stone of the modern company law, the availability of corporate personality may be exploited by those who want to undertake improper actions. Thus, such extraordinary privilege of separate legal entity should be prevented by piercing the corporate