LAW 7122 International Corporate Law Assignment Sample
Introduction
The aim of the essay is towards understanding through critical analysis of the past situations which had been agreed upon in breaking the veils in certain specific situations and also understand the position that has been taken by the court of UK. The concern would be towards comparing the stance that had been taken by the German and US courts in respect to similar incidents. The essay would be divided in several phases of its concern where the author would utile case studies as well as available data base as well as the foundation of the law which governs the court in certain situations in terms of lifting the veil. One of the cases that can be evoked in these cases is Adams versus Cape Industries (1990) where the tree arguments have been presented as well as rejected by the court while denying pierce the veil in that particular situation in concern. The author would like to analyze the extent upto which the ethics in which these situations occur are not based on the malfeasance applied in advance by the parties involved because they are aware of the main foundation of the courts and their reluctance to lift the veil, derived from the precedents they will cause with their decree.
The paper also takes into account the limited liability as well as legal personality which required to be taken into cooinsderation in order to understand the agency that can be discovered where the company had been used to suppress the property. The acts that have been considered in these respect are the Insolvency Act 1986 where in the section 213: where the paragraphs of 1 and 2 comprising Fraudulent trading had been taken into account acted as an exemption where the court too agreed upon pierce the weil.
The next case that has been reflected in respect is the case of Prest versus Petrodel Resources Ltd (2013) where the tree argument had been presented by Mrs Prest involving the facade that had been used by Petrodel. The concern would alo be directed towards looking into the Matrimonial Cause Act 1973 where the property that had been used bythe family acted as an asset from Mr Prest due to the evasion and had proved to be advantage for the controller who wanted to have the control by abusing the company by seperating the legalpersonality.
Discussion
Corporate Veil refers to the legal concept whereby the company which has been identified apart from the members of the company. The term corporate veils thereby refers to the concept whereby it suggests that the company’s members have been shielded from the liability that has been connected to the company and its actions. In case the company incurs any form of debt or any contravenes to the law, the concept of corporate veil implies that the members should not be held liable for other errors that had been accounted for. Thus in this case, the members enjoy insulation from the corporate and thereby the shareholders are also protected from the act that has been undertaken by the company[1].
One of the cases that can be reflected in this case is that of Salomon Vs Salomon and Co Ltd. The company in concern is distinct and has been separated from its concerned members. The company titled Salomon & Co. Ltd had been incorporated by one Almon and the company took over Salomon’s business assets of £ 38,782 and for each share of £1, 20,000 shares had been taken. There had been a subsequent movement of the company into liquidation due to the depression in the trades. The creditors who had been unsecured to the scene of £7,000 which had contended that Salomon could not ve treated as a secured creditor associated with the company specially in respect to the debentures which had been held by him as he had been on the position of the managing director or the one man company. This thereby clarified that the established company has an existence of its own and as a result the shareholders are not responsible for actions of the company irrespective of the fact whether the individual is in control of the entire share capital of the company in question. The law of corporation is thereby in fact dependent on the law which had been dependent on the theory that has been dependent on a separate corporate entity[2]
In the situation where there has been the tendency of the court to ignore the company as well as concern themselves directly with the managers and the members it has been said that the corporate veil has been lifted. In certain appropriate circumstances it is said that the courts have expressed their willingness to lift the corporate veil specially in cases where the question of control is taken into account as compared to the question of ownership. The sole purpose for the formation of had at times been regarded as an agent or trustee which had been connected to another company. The principal would be considered liable for the company.
Case study of Adams versus Cape Industries (1990)
The principle of corporate veil or separate corporate personality was established for a long period and had been considered as the central pillar for the modern company law. In the case that has been discussed in the above course of discussion it has been reflected that during the famous case of Salomon v Salomon & Co (1897) it had been ruled out by the House of the Lords that iresspectivve of the extent to which an individual shareholder in the company has interests of and also despite of the fact that the shareholder has been provided with the agency to exercise de factor complete control over the affairs that is of concern to the company yet the act of the company should not be considered as his actions and thereby the liabilities of the company can never be considered as his liabilities . Thereby it had posited the mfact that one shareholder controlling the company wholly in practice does not appear as a sufficient reason for the law to ignore the legal personality that the company has. It should thereby be taken into account that the Salomon principle’s operation is not of advantage for the individual dominant within the domain of the company[3].
In the case of Macaura V Northern Assurance Co (1925) it has been brought into account that the recognising separate corporate personality would cause the director of the company as well as its major shareholders in order to cause a huge losses to the director of the company as well as its shareholders after the property had been rehhgistered erroneously under his ownn name. Thus the separate legal persona of any company is often regarded as well as conceptualized as the ‘veil of incorporation’ and the general rule that had been emerging from the same posits that the veil would not be pierced or lifted by the intervention of thecourt so as to ensure that the rights of the company to its shareholders as well as its liabilities had been subjected to apportions.
The fundamental principle that had been developed in the case of Salomon in respect to the presence of a single company had been extended to be applied to cases involving a group of companies by the Court of Appeal which had been subjected to the discussion of Adams V Cape Industries plc (1990). Cape industry was a company that had been registered in England and had been concerned with mining asbesypr in mines of SOuth Africa and the proeducts of Cape Industrues had been marketed in the markets of the USA. This is carried out through a complex subsidiaries network and thereby had been associated with the company. A series class action had been undertaken by the company whereby a considerable numbers of workers in the factory had been contracted with a disease after they had inhaled asbeestos dust and thereby had managed to secure judgment in the court of America Against the company in cooncern, Cape which had been trusted with the holding of the company that had been presiding over other corporate group[4].
The litigamst had been unsuccessful in forcing the judgment against the Cape in the English court where the case had been subjected to. In the hearing it had been noted that
“The Court of Appeal held that an English trading company would only be treated as having been present and a possible a party to an action abroad if it had established a fixed place of business there at its own cost and either it or its representative had carried on business there for more than a minimal time” [5]
Thereby in this regard three arguments had been evolved in order to establish that the presence of Cape had been reflected in the United states . In reality it had been considered that the economic unit required to be treated by law as such. The next argument that has been posited in context to this case is the corporate veil argument. In this argument it had been posited that the corporate form was nothing more than the facade that had concealed the true fact associated with the situation and thereby which can be drawn aside in cases there had been any agency based control that has been developed in this regard. As per the third argument it has been noted that subsidiaries acted merely as an agency which had been based on the use of the argument[6].
Each argument however had been noted to fail and on the ground of legal drane it has been noted that contending its subsidiaries as well as cape required it to be contended as a single unit which could have been placed aside if such a move had been dictated appropriately as well as legally. The third argument that has been formed had been based on the argument of the agency and also the subsidiaries that came under the concern of the contracts of the company and also the principles that guided the offerings of the company to a certain extent. It had been found by the court that it had not been deemed entitled in lifting the corporate veil against the company that had been defendant which had been the members of the corporate groups and on the ground that the structure of the corporate had been used in order to ensure that the legal liabilities had been in regard to particular activities of the future and thereby would fall on other members of the group rather than the company that had been defendant. In the practical terms of the scenario it can be posited that the corporate veil required to be pierced specially due to the fact that the group of the companies had operated as the single economic entities in terms of the business reality.
On the application of the concerned principle that had been gathered from the Salomon case it had been held not to be presented in the United States and had reflected the consequences of the judgment that had been delivered in the courts of American and thereby had been deemed as enforceable in England [7].
The case has elucidated that the case of Adams V Capeindustries has reflected to be an excellent and strategic decision for the companies which had expressed the wish to manipulate and change the structure of the corporate groups in order to divert rights as well as liabilities. It has been submitted in this regard that the ones ruling had been beneficial highly to the companies which came with certain forms of agendas irrespective of the fact whether the original intention of the court of Salomon had been dubious or not[8].
The uncertainty had been persistent in the case of the Adams V Cape; it had been seemed that the decisive words had been delivered on the basis of the argument that had been provoked largely by the intervention of Denning in the year 1970. The judgment which had been provided by the Trustees of AB and the Smallbone and others has been reflected in the fact that the modern courts would not provide countenance to any form of further erosion which had been reflected in the Salomon’s fundamental principles of the English Company Law. It has thereby been noted that the company had been reflected as a legal personality which had been distinct from its members. Adams is undoubtedly considered as a seminal case where the contribution of the case had been reflected in the development of the law whose impact had either been a combination of positive and negative or both separately[9] .
Insolvency Act 1986
In the section 213 of the Insolvency Act of 1986 it is dedicated towards Fraudulent trading. The proposition of the acts in this respects highlight the fact that while winding up of a company it tends to appear that any company business had been carried on with the intention that the defraud creditors connected to the company or the creditor of any other person or for any form of Fraudulent purpose the following had been noted to have an impact. It has been reflected in the case.[10]
“The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above-mentioned are to be liable to make such contributions (if any) to the company’s assets as the court thinks proper. Thus in case when the company moves into liquidation it has been reflected that the shareholders are only liable up to bringing about the liminal amount of their share as per the section 74 (2) (d) of the Insolvency act”[11].
Prest versus Petrodel Resources Ltd (2013)
The Case has been the current concern of the paper refers to as the Prest V Petrodel Resources Ltd (2013) which is the leading Company Law decision in UK taken by the UK Supreme Court and thereby concerning the nature of the doctrine involved in the piercing of the corporate veil and thereby resulted in the equitable proprietary as well as trusts and remedies especially in the context of the English family law. This law or the legal case also draws upon the historic case of Salomon V alomon which had posited that the company comes with a different personality of ones who are its members and having said that the members and the associated shareholders could not be considered liable for the debts that the company have it lies beyond their contribution in the financial; ground which had been initially made. However it also takes into account different circumstances where the courts had been prepared in order to pierce the veil associated with the corporate personality in order to look for the members of the company who can be considered liable for the actions of the company in certain and specifc circumstances under the concern of the law. The law in this area of concern thereby had been strife with the conflicting principles as well as many of the commentators which have carried the feeling that the decision which had been undertaken in case of Prest V Perodel provides as a case of opportunities whereby the evergon concern of when the corporate veils can be pierced is brought about to a conclusion or to an end[12].
The case considers the divorcing Mr and Mrs Prest had been a wealthy couple who had been divorced. The company had owned a matrimonial home of substantial wealth in the UK as well as the second home for Nevis.It has been found that Mrs Prest had been contended with the fact that the wealth of her husband had been vast and thereby exceeded the properties as well as the ones that had been argued and which also accumulated the properties which had been in reality owned under him[13]. It required to be brought under consideration that although the home which had been matrimonial was under one of these companies it can be posited in the Court of Appeal that it was held on Trust in respect to Mrs Prest and thereby had been hold on trust for Mrs Prest and thereby did not for a crucial part of the appeal that had been made to the Supreme Court.
Originally the case had been subjected to the hearing of the family court preented as an application made for the case of ancillary relief which had been held by the wife in the case of spouses who had been divorcing where it had been held under Moylan LJ that althoughit lacked the presence of general principle with the usage of which the corporate veil could have been lifted. This had been deemed possible under section 24(1)(a) as per the Matrimonial Causes Act is concerned [14].
It has been posited by some of the commentators that the decisions of the Prest is to be welcomed; it had been presented as the cornerstone of the UK company Law. It has also been recognised that there had been the circumstances where the veil can be pierced so that a remedy can be granted. Although the case does not clear the process of veil piercing it can be considered appropriate where there had been evasion in the ownership of liabilities while there had been no remedy in the course of law which will be provided as an appropriate remedy. The judgment did not any give any indication of the precisely which comprises of the circumstances where the veil might have been pierced and thereby the decision had been seen as a capable enough in contributing to the uncertainties that revolved around the area of law and also involved another cynical commentator which has argued that the Sumption of the Lord had been delivered. Thus in the case of the Prest it meant to be delivered that it did not require to determine the definitive circumstances where the veil has been pierced in the future. The case of Prest had thereby involved in the case of cynicism. It had been reflected it is unfortunate the positions that although there had been limited doctrine for Prest it has been reflected that it could be used as a remedy to be used as last resort as well as a future decision which would be required in order to confirm exactly how the doctrine might be applied [15].
Delaware law and Corporate veil
The state of Delaware had been incorporated within the Fortune 500 companies. A significant reason that has been done is the fact is the phenomenon which is known as the Corporate veil. The idea of veil is looked at as a legal concept which is defined as “that separates the personality of a corporation from the personalities of its shareholders, and protects them from being held personally liable for the company’s debts and other obligations.”
The corporate veil has thereby been deemed essential as a concept which has maintained corporate law throughout the world. The importance of the corporate veil from the position of Delaware could not be understood. Delaware had thereby been possessed which has stacked of the legal doctrine that had stipulated the separation of the corporations from the associations with its shareholders. The distance that has been between the investors as well as the corporations in which the investment had been permitted to the investors as well as the shareholders in order to make them feel comfortable in the investment [16].
Corporate Veil in Germany
The lowering of the Corporate veil in Germany had been reflected in the case note on the BGH16 July 2007 in the Trihotel. In the recent Trihotel case it had been reflected in the German Federal Court of the Justice it had been modified substantially that had modified the previous position in order to lift the corporate veil which would make the shareholders into becoming creditors of the company. It can be argued that the tort-based new approach would not afford the creditors of the company in providing adequate protection but also has been directed towards the German company law which had been directed as jurisprudence towards providing a greater reward for the fundamental principles for bringing about insolvency as well as bringing about company[17].
Conclusion
In order to conclude it can be posited that correlate veil as a part of the company law had been dealt with effectively. It is a legal concept which has limited power in being pierced in limited scenarios and analysis that has been made in respect to the UK, Germany and US and thereby could not be affected positively.
References
Alanazi, B.M.A.,. Piercing the corporate veil in various 3. jurisdictions–Principled or unprincipled. Corporate Board: Role, Duties and Composition, [2020] 16(2), pp.47-53.
Beebeejaun, A.,. Piercing the corporate veil for environmental torts in Mauritius: a comparative study.[2020] Journal of Financial Crime.
Bork, R.,. Sequana I: Struggling with section 423 of the Insolvency Act 1986. [2021] International Insolvency Review.
Cheng-Han, T., Wang, J. and Hofmann, C.,. Piercing the Corporate Veil: Historical, Theoretical and Comparative Perspectives. [2019]. Berkeley Bus. LJ, 16, p.140.
Choquet, P.L., Piercing the corporate veil: Towards a better assessment of the position of transnational oil and gas companies in the global carbon budget. [2020]. The Anthropocene Review, 6(3), pp.243-262.
Dewi, S., Mengenal Doktrin Dan Prinsip Piercing The Corporate Veil Dalam Hukum Perusahaan. [2018]. Soumatera Law Review, 1(2), pp.380-399.
El-Gendi, M.,. Prest v Petrodel Resources Limited: The Veil Finally Pierced?. [2020] ISLRev, 7, p.15.
Karmaza, O.O., Makhinchuk, V.M., Derkach, A.L., Spektor, O.M. and Sheludchenkova, A.S.,. Application of “piercing the corporate veil” doctrine in the Ukrainian law. [2020]
Na, T., Piercing the corporate veil: when LLCs and corporations may be at risk. [2019] International Journal of Law and Management.
Nzegwu, S.N. and Uhumuavbi, I., Assessing the suitability of “Lifting the Corporate Veil” Legal Mechanism in the Enforcement of Law on Corporate Manslaughter and Corporate Social Responsibility in Nigeria. Educational Research (IJMCER), [2022] 4(1), pp.129-140.
Nsubuga, H.J.,. The road to Prest v Petrodel: an analysis of the UK judicial approach to the corporate veil-part 2: post Prest. International company and commercial law review, [2022]. 31(11), pp.597-608.
Tikhon, P., Protection of property rights based on the doctrine of piercing the corporate veil in the russian case law. [2018]. Russian Law Journal, 6(2), pp.39-72.
Vastardis, A.Y. and Chambers, R.,. Overcoming the corporate veil challenge: could investment law inspire the proposed business and human rights treaty?. International & Comparative Law Quarterly, 67(2), [2018]. pp.389-423.
[2] Dewi, S., Mengenal Doktrin Dan Prinsip Piercing The Corporate Veil Dalam Hukum Perusahaan. [2018]. Soumatera Law Review, 1(2), pp.380-399.
El-Gendi, M.,. Prest v Petrodel Resources Limited: The Veil Finally Pierced?. [2020] ISLRev, 7, p.15
[3] Tikhon, P., Protection of property rights based on the doctrine of piercing the corporate veil in the russian case law. [2018]. Russian Law Journal, 6(2), pp.39-72.
[4] Dewi, S., Mengenal Doktrin Dan Prinsip Piercing The Corporate Veil Dalam Hukum Perusahaan. [2018]. Soumatera Law Review, 1(2), pp.380-399.
El-Gendi, M.,. Prest v Petrodel Resources Limited: The Veil Finally Pierced?. [2020] ISLRev, 7, p.15.
[5] Karmaza, O.O., Makhinchuk, V.M., Derkach, A.L., Spektor, O.M. and Sheludchenkova, A.S.,. Application of “piercing the corporate veil” doctrine in the Ukrainian law. [2020]
[6] Macey, J.C.. What corporate veil?’We the Corporations’. [2020].Michigan Law Review, 117(6), pp.1195-1214.
[7] Beebeejaun, A.,. Piercing the corporate veil for environmental torts in Mauritius: a comparative study.[2020] Journal of Financial Crime.
[8] El-Gendi, M.,. Prest v Petrodel Resources Limited: The Veil Finally Pierced?. [2020] ISLRev, 7, p.15.
[9] Bork, R.,. Sequana I: Struggling with section 423 of the Insolvency Act 1986. [2021] International Insolvency Review.
[10] Alanazi, B.M.A.,. Piercing the corporate veil in various 3. jurisdictions–Principled or unprincipled. Corporate Board: Role, Duties and Composition, [2020] 16(2), pp.47-53.
[11] Cheng-Han, T., Wang, J. and Hofmann, C.,. Piercing the Corporate Veil: Historical, Theoretical and Comparative Perspectives. [2019]. Berkeley Bus. LJ, 16, p.140.
[12] Choquet, P.L., Piercing the corporate veil: Towards a better assessment of the position of transnational oil and gas companies in the global carbon budget. [2020]. The Anthropocene Review, 6(3), pp.243-262
[13] Cheng-Han, T., Wang, J. and Hofmann, C.,. Piercing the Corporate Veil: Historical, Theoretical and Comparative Perspectives. [2019]. Berkeley Bus. LJ, 16, p.140.
[14] Dewi, S., Mengenal Doktrin Dan Prinsip Piercing The Corporate Veil Dalam Hukum Perusahaan. [2018]. Soumatera Law Review, 1(2), pp.380-399.
[15] Nsubuga, H.J.,. The road to Prest v Petrodel: an analysis of the UK judicial approach to the corporate veil-part 2: post Prest. International company and commercial law review, [2022]. 31(11), pp.597-608.
[16] Vastardis, A.Y. and Chambers, R.,. Overcoming the corporate veil challenge: could investment law inspire the proposed business and human rights treaty?. International & Comparative Law Quarterly, 67(2), [2018]. pp.389-423.
[17] Tikhon, P., Protection of property rights based on the doctrine of piercing the corporate veil in the russian case law. [2018]. Russian Law Journal, 6(2), pp.39-72.
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