Instances Where The Veil Of Incorporation Is Lifted

NotesObjective Test

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

  1. Where a company is being used to evade legal duties of the member  Gilford Motor Co v Horne

  2. 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

  3. 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

  4. 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

  5. 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

  1. Failing to have correct trading certificates

  2. Fraudulent trading – continuing to trade a company with intent to defraud creditors, or any other fraudulent purpose

  3. Wrongful trading – continuing to trade an insolvent company without taking all reasonable steps to minimise the potential losses to creditors

NotesObjective Test