Moreover people may register a company in order to

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was responsible for any wrongdoing. Moreover, people may register a company in order to undertake transactions, which they were otherwise forbidden from undertaking; to avoid legitimate obligations; to defraud the Inland Revenue, etc. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY CORPORATE PERSONALITY 373 An overarching policy of the law is that legal principles would not be allowed to be deployed as instruments for fraud or wrongdoing. In certain situations, therefore, the court will ignore the separate identity or corporate personality of a company and hold accountable the natural persons behind it. This is called lifting or piercing the veil of incorporation. This is necessary because companies are artificial persons and are therefore not able to do anything by themselves. People behind the veil of incorporation must not therefore be allowed to misuse the corporate principle. Having said that, the corporate personality principle is a fundamental one, and the courts will not lift the corporate veil lightly. Statutory provisions would be interpreted, as much as possible, to give effect to the corporate personality principle as upheld in Salomon v Salomon. In fact, the ability of the courts to lift or pierce the corporate veil is limited even if the instances where this could be done are not closed. The veil would usually be lifted where the company is fraudulent or a sham, where it is in the interest of the public to do so, or where a statute so requires. In Prest v Petrodel Resources Ltd [2013] 2 AC 415, 416 , the Supreme Court rationalised the principle of piercing the corporate veil and explained its limits as follows: Download free eBooks at bookboon.com Click on the ad to read more .
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BUSINESS ORGANISATIONS AND AGENCY 374 CORPORATE PERSONALITY The recognition of a limited power to pierce the corporate veil and to disregard the separate personality of a company in carefully defined circumstances  was necessary if the law were not to be disarmed in the face of abuse and, provided that the limits were recognised and respected, it was consistent with the general approach of English law to the problems raised by the use of legal concepts to defeat mandatory rules of law; that, therefore, if a person were under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evaded or the enforcement of which he deliberately frustrated by interposing a company under his control, the court could pierce the corporate veil for the purpose, and only for the purpose, of depriving that company or its controller of the advantage which they would otherwise have obtained by the company’s separate legal personality. In Ben Hashem v Ali Shayif [2008] EWHC 2380, Mumby J made a similar observation: The common theme running through all the cases in which the court has been willing to pierce the veil is that the company was being used by its controller in an attempt to company. It is therefore necessary to identify the relevant wrongdoing.
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  • Fall '19
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