Lifting the Corporate Veil Essay Example | Topics and Well Written Essays - 2500 words

Lifting the Corporate greater omentum - Essay ExampleThe extremely famous and somewhat revolutionary decision of Salomon v Salmon & Co Ltd 18971 introduced and upheld the corporate mortalality article of faith which was then defined in the Companies Act 1862. The effect of the decision was that creditors of a company that had gone insolvent would not be able to sue the shareholders of the company for its outstanding debts the doctrine of separate corporate personality was effectively entrenched by the House of Lords. More noticeably, the House of Lords fully established the concept that the company exists as a separate personality from that of its members, causing the company to own its own entity, thus competent to sue and be sued,4 to enter into contractual agreements,5 to make profits and fuck off losses in its own name,6 and to own property. The decision of Salomon also formed the beneficial concept that shareholders would be afforded limited liability in the event of ins olvency of the company. Despite the passing of more than a century, the dicta of the House of Lords has stood satisfying as an unyielding rock,7 even enjoying codification in section 16(2) of the Companies Act 2006. The decision brought some(prenominal) new effects to the company law world. Lord Herschell claimed that the company is ex hypothesi a distinct lawful person2 and Lord McNaghten stressed that the company is at law a different person altogether from the subscribers to the memorandumnor are the members as subscribers liableexcept to the extent and in the manner provided by the Act.3 ... When ordain the courts disregard Salomon and lift the corporate veil? Can a specific brand of criteria be established in order to determine when the veil ordain be lifted, or does it suppose on the particular circumstances of each case? It is arguable that the courts previous instances of lifting the corporate veil have been difficult to predict with any degree of certainty. It will b e argued however that this is not necessarily inopportune and any alternative approach of the courts could prove more detrimental to company law as a whole. Attempts to establish specific criteria for lifting the veil have been fruitless, as the courts have remained adamant to keep derogations from Salomon flexible. This paper will evaluate when the courts have lifted the corporate veil, and under what circumstances they chose to as opposed to when the courts have specifically refused to lift the corporate veil. Potential for reforms in the law will be explored, though it will in the long run be argued that codification of the lifting of the veil will greatly reduce, even remove the flexibility enjoyed by the courts when lifting the veil. It will be argued that this flexibility is essential in order to make the principle apply as and when the courts claver fit. Have the courts approached the lifting of the veil appropriately, or is the veils fate left arbitrarily in the pass on of the court? Is more certainty required? When Is The Corporate Veil Lifted? It is clear to see that the reckon surrounding the courts lifting of the corporate veil has centred around the need to balance between certainty and flexibility. The courts have been presented with extremely varied situations and circumstances under which they were required to decide whether the veil