LIFTING THE CORPORATE VEIL English Essay 揭开公司纱LIFTING THE CORPORATE VEIL Bibliography Books and Journals John Dewey The Historic Background of Corporate Legal Personality 35 Yale LJ655 passim 1926 Wil

in law, separate and distinct from those of its shareholders and directors. This legal concept is known as "separate legal personality" or "corporate personality." It means that a company is a separate legal entity from its shareholders and directors, with its own legal rights and obligations.

However, there are situations where the corporate veil may be lifted, and the courts may disregard the separate legal personality of a company. This can happen in cases where the company is being used to perpetrate a fraud or other wrongdoing, or where justice demands that the corporate veil be lifted.

The purpose of this essay is to explore the concept of lifting the corporate veil, with reference to the UK case law and academic literature. The essay will begin by examining the historic background of corporate legal personality, before discussing the legal principles underlying the doctrine of separate legal personality and limited liability. It will then examine the circumstances in which the courts may lift the corporate veil, with reference to relevant case law. Finally, the essay will consider the criticisms of the doctrine of separate legal personality and limited liability, as well as the arguments in favour of maintaining these legal principles.

Legal Principles: The Doctrine of Separate Legal Personality and Limited Liability

The concept of separate legal personality is a fundamental principle of company law, which means that a company is a separate legal entity from its shareholders and directors. This principle was established in the landmark case of Salomon v Salomon & Co Ltd [1897] AC 22, where the House of Lords held that a company was a separate legal entity from its shareholders, and that the company's creditors could not sue the shareholders for the company's debts.

The principle of limited liability is closely linked to the doctrine of separate legal personality. It means that the liability of the shareholders of a company is limited to the amount of their share capital. Therefore, if a company becomes insolvent, its creditors can only recover the amount owed from the company's assets, rather than from the personal assets of the shareholders.

The separate legal personality and limited liability of a company provide numerous benefits to businesses and investors, such as facilitating the raising of capital, encouraging entrepreneurship, and providing a shield against personal liability. However, these legal principles can also be misused to perpetrate fraud or other wrongdoing.

Lifting the Corporate Veil: Circumstances in which the Courts may Disregard the Separate Legal Personality of a Company

There are certain circumstances in which the courts may lift the corporate veil and disregard the separate legal personality of a company. These include:

1. Where the company is a sham or a façade: If a company is set up as a sham or a façade, with no real business or purpose, the courts may disregard its separate legal personality. This was established in the case of DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852, where the court held that the corporate veil could be lifted if the company was a mere façade concealing the true facts.

2. Where the company is being used to perpetrate a fraud or other wrongdoing: If a company is being used to perpetrate a fraud or other wrongdoing, the courts may lift the corporate veil to allow the wrongdoers to be held personally liable. This was illustrated in the case of Re Darby Trading Ltd [1994] BCC 485, where the court lifted the corporate veil to allow the directors of a company to be held personally liable for fraudulent misrepresentation.

3. Where there is an agency relationship between the company and its shareholders: If the company is acting as an agent of its shareholders, the courts may lift the corporate veil to hold the shareholders personally liable. This was established in the case of Adams v Cape Industries plc [1990] Ch 433, where the court held that the corporate veil could be lifted if the company was acting as the agent of its parent company and the parent company was controlling the activities of the subsidiary.

Criticism of the Doctrine of Separate Legal Personality and Limited Liability

The doctrine of separate legal personality and limited liability has been subject to criticism by some commentators. The main criticisms are:

1. The doctrine can be used to perpetrate fraud or other wrongdoing: The separate legal personality and limited liability of a company can be misused to perpetrate fraud or other wrongdoing, such as tax evasion or money laundering.

2. The doctrine can lead to injustice: In some cases, the doctrine of separate legal personality and limited liability can lead to injustice, such as where a company is used to shield the assets of a wealthy individual from creditors.

Arguments in Favour of the Doctrine of Separate Legal Personality and Limited Liability

Despite the criticisms, the doctrine of separate legal personality and limited liability remains a fundamental principle of company law. The main arguments in favour of these legal principles are:

1. They facilitate the raising of capital: The doctrine of separate legal personality and limited liability encourages investment and entrepreneurship by providing a shield against personal liability.

2. They promote economic growth: The doctrine of separate legal personality and limited liability promotes economic growth by facilitating the establishment and expansion of businesses.

Conclusion

In conclusion, the doctrine of separate legal personality and limited liability is a fundamental principle of company law that has been subject to much debate and criticism. While there are circumstances in which the courts may lift the corporate veil and disregard the separate legal personality of a company, the doctrine remains an important legal principle that encourages investment, entrepreneurship, and economic growth