company_law_ch4

company_law_ch4 - Chapter 4 Lifting the veil of...

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Unformatted text preview: Chapter 4 Lifting the veil of incorporation Contents Introduction 36 4 1 Legislative intervention 37 4 2 Judicial veil lifting 39 4 3 Veil lifting and tort 41 Reflect and review 43 page 36 University of London External System Introduction As we observed in Chapter 3 the application of the Salomon principle has mostly (remember Mr Macaura) beneficial effects for shareholders. The price of this benefit is often paid by the company’s creditors. In most situations this is as is intended by the Companies Acts. Sometimes, however, the legislature and the courts have intervened where the Salomon principle had the potential to be abused or has unjust consequences. This is known as ‘lifting the veil of incorporation’. That is, the courts or the legislature have decided that in certain circumstances the company will not be treated as a separate legal entity. In this chapter we examine the situations where the legislature and the courts ‘lift the veil’. Learning outcomes By the end of this chapter and the relevant readings, you should be able to: u describe the situations where legislation will allow the veil of incorporation to be lifted u explain the main categories of veil lifting applied by the courts. Essential reading ¢ Dignam and Lowry, Chapter 3: ‘Lifting the veil’. ¢ Davies, Chapter 8: ‘Limited liability and lifting the veil at common law’ and Chapter 9: ‘Statutory exceptions to limited liability’. Cases ¢ Gilford Motor Company Ltd v Horne [1933] Ch 935 ¢ Jones v Lipman [1962] 1 WLR 832 ¢ D.H.N. Ltd v Tower Hamlets [1976] 1 WLR 852 ¢ Woolfson v Strathclyde RC [1978] SLT 159 ¢ Re a Company [1985] 1 BCC 99421 ¢ National Dock Labour Board v Pinn & Wheeler Ltd [1989] BCLC 647 ¢ Adams v Cape Industries plc [1990] 2 WLR 657 ¢ Creasey v Breachwood Motors Ltd [1992] BCC 638 ¢ Ord v Belhaven Pubs Ltd [1998] 2 BCLC 447 ¢ Williams v Natural Life Health Foods Ltd [1998] 2 All ER 577 ¢ Lubbe and Others v Cape Industries plc [2000] 1 WLR 1545. Additional cases ¢ Re Todd Ltd [1990] BCLC 454 ¢ Re Patrick & Lyon Ltd [1933] Ch 786 ¢ Re Produce Marketing Consortium Ltd (No 2) [1989] 5 BCC 569 ¢ Trustor AB v Smallbone [2002] BCC 795 ¢ Noel v Poland [2002] Lloyd’s Rep IR 30 ¢ Daido Asia Japan Co Ltd v Rothen [2002] BCC 589 ¢ Standard Chartered Bank v Pakistan National Shipping Corp (No 2) [2003] 1 AC 959 ¢ R v K [2005] The Times , 15 March 2005 ¢ MCA Records Inc v Charly Records Ltd (No 5) [2003] 1 BCLC 93 ¢ Koninklijke Philips Electronics NV v Princo Digital Disc GmbH [2004] 2 BCLC 50. Company law 4 Lifting the veil of incorporation page 37 4.1 Legislative intervention As corporate affairs became more complex and group structures emerged (that is, where a parent company organises its business through a number of subsidiary companies in which it is usually the sole shareholder) the Companies Acts began to recognise that treating each company in a group as separate was misleading. Over time a number of provisions were company in a group as separate was misleading....
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This note was uploaded on 11/16/2011 for the course ECON 101 taught by Professor Tom during the Spring '11 term at FH Joanneum.

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company_law_ch4 - Chapter 4 Lifting the veil of...

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