Separate Legal Personality (Piercing The Corporate Veil. (Sham Argument /…
Separate Legal Personality
Piercing The Corporate Veil.
VTB v Nutritek
- A company should be treated as though it is a human being, the fact that it can only act or think through humans does not question this fact it only offered the law of agency.
There are many statutory mechanisms in play which allow the corporate veil to be lifted such as the Insolvency Act which allows personal liability for those who seek to use separate legal personality to defraud creditors - Ie Preventing
being used as a vehicle of fraud
It is possible for a person to be an agent for the company and thus act on their behalf and enter contract for them -
This is decided on the case facts and it requires consent from the company for someone to act as their agent. -
Mincing Lane v DTI
It is unlikely for a company's subsidiary to be found to be an agent of it -
EBBW v Wales
Prest v Petrodel*
- If you have assets in a company and you get a divorce then your wife cant get assets out the company.
Sham Argument / Evasion principle
You cant set up a new business to avoid liability -
- Set up a company in his wifes name in order to avoid a no competition covenant.
Jones v Lipman
- A man had contracted to sell land to another however prior to completion the land was transferred to a company he solely owned - "The company is a device, a sham a mask to avoid the eye of equity"
- The wrong doing must be completely dehors (outside) the company, iot must be the controller's wrong doing not the companies
- A ship was due to be hired out, however it was sold to another company with the same owners, it was held the second co
Principle was originally established in
Salomon v Salomon
where it was held the company had a different personality to that of the directors. Thus allowing the company to enter into contracts and litigation as its self.
Libel/ Slander -
Jameel v Wall Street Journal.
This said it cant be awarded aggravated damages as companies do not have feelings! -
Collins v FT
Property belonging to the company belongs to the company and not to the members.
Macaura v Northern Assurance
This however was often asserted to be ignorable, the courts in
Prest v Petrodel
disagreed saying the corporate veil shouldn't be lifted
Farrar v Farrars Ltd
- A sale from one company you own to another you own is not a sale to yourself, however there is a duty to get the best price.
Re Lewis Wills Trust
- Man owned a farm, and left it via his will to his son. The farm was infact owned by his company not himself, meaning shares in the company passed under the intestacy rules not the will
- The death of members does not bring the company to the end and it may continue.