Veil-Piercing Doctrine: A Critical Analysis of its Application and Necessity

Revisions on the Veil-Piercing Doctrine

Despite Sumption LJ's attempt to establish a coherent principle on when the court could overlook the corporate personality of a corporation in the 'Prest v Petrodel' case, the application of the new test has not saved the veil-piercing doctrine. The court's misapplications of Sumption LJ's formulation indicate that the application of the veil-piercing doctrine remains confusing even after 'Prest'. This confusion may be caused by the inherently deficient nature of the concealment principle and the evasion principle. The boundaries of the evasion and concealment principles are obscure, making the test difficult to apply objectively and consistently. Additionally, the principle of evasion and principle of concealment appear to have the same effect, suggesting that the 'Prest' approach does not actually limit the application scope of the veil-piercing.

Regarding the necessity of the veil-piercing theory, it has been argued that the doctrine is redundant, given that the court could invoke alternative conventional legal principles to reach the same result without disregarding corporate personality. Furthermore, using the veil-lifting doctrine as a residual remedy is not sensible because it inevitably undermines the Salomon principle. The veil-lifting doctrine exists merely because it has been assumed to exist. If the court abandons this doctrine, it will bring legal certainty and benefit businesses by reducing complications and costs. Therefore, it is maintained that the courts should not have any discretion to ignore the corporate personality.