CORPORATIONS LAW

Corporations Law

Corporations Law

Piercing the veil - companies are distinct lawful personalities, which means they can litigate and be litigated like normal people and the company is distinct from its proprietors etc. Piercing the corporate veil is where this separate legal personality is ignored by the courts - originally from the keystone case in company law Salomon v Salomon & Co [1897] AC 22. Basically Salomon had a sole proprietorship, than set up a limited liability company call Salomon & Co to buy his proprietorship for £20,000 in cash and £20,000 in debentures (making him a primary creditor). Eventually Salomon & Co went bust and Salomon was a secured and favoured creditor and one time he had been paid there was effectively not anything for the other creditors. In this case the referees at the dwelling of Lords denied to pierce the business veil regardless of the contentions brought by the prosecution and at the expense of the creditors, and that Salomon lost not anything from the conclusion (evidence for the enclosures reluctance to pierce the veil?).

As silly hilly said earlier in the case of Adams v Cape Industries [1990] 2 WLR 657 there are times when the courts will pierce the veil: sham company - obviously this isn't going to apply to GKP and TKI. Agency argument the single financial unit argument. It is furthermore significant to note here that the Cape commerce case isn't analogous to GKP, but is just a good basis to display on what surrounds the enclosures will pierce the veil (the case was founded on asbestos and asbestosis within a assembly of subsidiary companies. One of subsidiaries was found guilty in a Texas court but was bankrupt so the claimants endeavoured to pierce the veil to the parent company…unsuccessfully).

Single economic unit argument: “there is no general standard that all businesses in a assembly of businesses are to be considered as one. On the opposing, the basic standard is that each company in a assembly of companies is a distinct lawful entity owned of distinct legal privileges and liabilities” and the extent that the businesses desires to be related is a high barrier. “the case when a parent business owns all the shares of the subsidiaries - so much so that it can command every action of the subsidiaries. Most often a company committed in multi-national undertakings will operate in diverse nations through local subsidiaries incorporated there. Liability may be acquired because of hazards affiliated with the excavation or constructing procedures or the goods circulated through the subsidiary may origin damage to buyers or users. The subsidiary is apparently mainly responsible for its own acts or defaults. The inquiry is: when can liability for such actions or defaults be sheeted dwelling to the parent corporation?

In essence, the doctrine allows a court to refuse to hear a case where there is some other available legal forum 'in which the case may be tried more suitably for the interests of all the parties and for the ends ...