The various ways by which the court has lifted the veil of incorporation and disregarded the corporate entity are so varied as to strongly suggest that the court is guided above all by the principle that it will do so when fairness and justice require it.-Discuss…
The intention of the law makers is to establish a corporate fiction which is regarded as a legal juristic person with a separate legal entity, which is distinctive from the shareholders who own it and which gives the primary benefit of limited liability to shareholders. The main aim behind is that to encourage the shareholders to offer capital and to assume more risk on investments. By designing this, not only the costs are externalised but also the risk is mitigated to third parties. Due to this limited liability criterion, investor confidence is encouraged which in turn will kindle the economic development. Thus, limited liability can be seen as the foundation of the capitalism. Further, as moral hazard comes into operation, the benefits may not be equal to the externalisation costs thereby creating economic losses to third parties. So as to promote justice and fairness, the court may disregard the assumption of limited liability infrequently and thus court will inflict personal liabilities on the shareholders for the losses suffered by third parties in dealing with the company. This doctrine is called as lifting of corporate veil and this research essay will analyse how the courts are lifting the corporate veil when fairness and justice require it. Thus, the lifting of the corporate veil is a highly litigated issue in the corporate law sector1. Lifting of Corporate Veil under Fairness and Justice Grounds Under English Companies Act, the company is a distinct legal person wholly divergent from its members, and the company is entrusted to enjoy the privileges and owe some duties, which are distinct from that of rights or duties enjoyed by its shareholders. This notion has been regarded as a veil, a curtain or a shield between the members and the company. As an iron curtain, the shield is regarded as an impassable curtain. This has been well established in the case Salomon v Salomon & Co Ltd2. In this case, “it was held by the House of Lords that the company had been incorporated appropriately, and it was a legal person before the law and was different from those who established it”. As there was no fraud was committed by Solomon, the House of Lords were of the opinion that the secured debentures issued to Solomon would have priority over the unsecured creditors in the case of winding up proceedings of the company. Though 100% shares were held by Solomon and his family members, the court observed that company is distinct from its shareholders3. The creditors witness an inherent peril in dealing with a company since liability of shareholders is limited. When the risks are improperly or excessively transferred to creditors by the shareholders, then the liability shield is not justified. Under this scenario, courts have the capacity to disregard the separate corporate identity. The courts balance two competing features namely offering economic and democratic justification for the limited liability characteristic so as to promote the growth of the economy and the corporations and hence, the courts will be always hesitant to lift the corporate veil. However, the society and the creditors should be safeguarded as well from any peril unleashed by the companies and the shareholders. This fairness argument compels the courts to lift the corpo ...
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(“Company Law Essay Example | Topics and Well Written Essays - 2000 words”, n.d.)
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(Company Law Essay Example | Topics and Well Written Essays - 2000 Words)
“Company Law Essay Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.net/other/10836-company-law.
The study helps to analyze the legal matters associated with the companies act and to distinguish between situations under which a person serving for the organization are held guilty and in situations where he is simply let off. It can concluded that the court of Law is very much strict with matters of fraud and punishes the convict and provides him with no opportunity to hide behind the reasons of serving his obligation for the company.
This paper seeks to perform an IRAC analysis of fraudulent phoenix activity, whereby the issue, rule, analysis, and conclusion will be made. Issue Australian corporate law has always sought to reinforce commercial and entrepreneurial risk taking, since these are essential to the creation of wealth, as well as the continuous functioning of the market (Adams, 2012).
Note however, that the arbitration system and enforcement capacities also have a role to play as far as business law is concerned. Under this sphere are the commercial courts and the specialized economic courts. They come in when transactions between parties are not honored.
The law outlines that directors cannot receive any benefit from their position, unless they obtain an express legal authority from the board to do so. The Companies Act outlines that a director of a company must to circumvent situations in which the director possess, or can manifest an express or indirect interest that diverges of may clash with the interests of the company.
It has been enforced with the intention to govern the operations of the corporate houses of the country and instructs them to operate with the best interest of all the stakeholders involved with them1. As per the Company Law, it is commonly admitted that company is a separate legal entity which advocates that the members of the company are distinct from the corporate body.
It is particularly owing to the fact that the extension of the case led to the foundation of the Salomon principles in relation to Company Law related statutes. The principle, in simple terms, implies that the company has been legally incorporated and accordingly it should be considered as an independent person with certain specific rights along with liabilities to guide its operations.
g the position of director, by whatever name called", which includes a person who is treated by the board as such despite not having been validly appointed. The law also recognises the concept of shadow director, which is defined by section 251.
In the shareholder-centred view
When legal provisions that govern the interaction of employers and employees are violated, or when either party fails to meet their legal obligations, lawsuits are highly likely to occur. In the Chandler v Cape plc  EWCA 525 case, a health and safety issue resulted in a
In other words, this verdict has provided a veil between an owner and a company and through this veil the owner would not be personally blamed or persecuted if corporate actions have been taken on behalf of the company; Thereby, the company would itself be
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