CIMA BA4 Syllabus D. COMPANY ADMINISTRATION - Instances Where The Veil Of Incorporation Is Lifted - Notes 6 / 12
Lifting the Veil
Both common law and statute allow the veil to be lifted
What does this mean?
The members or directors of a company can then be held personally liable for the debts of the company.
Common law situations to lift the veil
Where a company is being used to evade legal duties of the member Gilford Motor Co v Horne
To recognise the alien enemy character of a company Daimler Co Ltd v Continental Tyre and Rubber Co (GB) Ltd
Here the veil is lifted to see if the members of the company are from a country we are at war with
To identify the controlling mind of a company in cases of corporate manslaughter R v OllLtd
Here - a company may have killed someone negligently - if the negligence is down to one of the members of the company - then the veil may be lifted
The company is actually a partnership (a quasi-partnership) - hence the veil can be lifted as partners can be sued personally – Ebrahimi v Westbourne Galleries
Lifting the veil as a group of companies may be so inter-related that they're one single entity. So sue 1 sub and you sue the rest of the group companies too. DHN v Tower Hamlets
Statutory reasons to lift the veil
Failing to have correct trading certificates
Fraudulent trading – continuing to trade a company with intent to defraud creditors, or any other fraudulent purpose
Wrongful trading – continuing to trade an insolvent company without taking all reasonable steps to minimise the potential losses to creditors