Corporate Liability and Veil Piercing

This business law assignment explores the concepts of corporate liability and piercing the corporate veil. It examines the 'identification doctrine' which links the actions of servants and agents to the corporation itself, using landmark cases like Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd and Daimler Co Ltd v Continental Tyre and Rubber Co (Great Britain) Ltd as examples. Furthermore, it delves into the circumstances under which the corporate veil can be lifted, citing cases such as Adams v Cape Industries plc and Prest v Petrodel Resources Ltd, highlighting the legal principles governing this complex area of business law.

Running head: BUSINESS LAW
Business Law
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BUSINESS LAW
Answer 1
Some basic principles for identifying corporate liability in relation to both criminal and
civil wrongs committed by servants and Agents of the organisation are derived from the
identification doctrine. With respect to this theory the mind's individually and collectively of one
or more persons who direct and control the organisation are with respect to law the mind of the
organisation itself. The Doctrine is therefore known as the theory of directing mind and will. The
doctrine was initially developed from the case of Lennard's Carrying Co Ltd v Asiatic
Petroleum Co Ltd [1915] AC 705. The question in this case before the House of Lords was that
whether a ship owner can be held liable for losses with respect to cargo because of one of its
ships being negligently navigated. It was provided by the judges in this case that the actual fault
is not only determined through the liability of agents and servants but also in relation to the
liability of the organisation which can be held liable through someone who's negligence can be
identified as the action of the corporation itself.
Following this case in the case of Daimler Co Ltd v Continental Tyre and Rubber
Co (Great Britain) Ltd [1916] 2 AC 307. It was confirmed by the judge that the place of
residence of the company can be held as one where directing mind and will of the organisation
controlled and operated its officers. In the case of El Ajou v Dollar Land Holdings plc [1993]
EWCA Civ 4 the doctrine of directing mind and will was completely reshaped by the court. In
this case it was provided by the court that any person can be a directing mind and will of the
company in relation to different purposes. Therefore the basic principle of this theory is that
anyone who is controlling and managing the company is regarded as the person who is directing
mind and will of the company.

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BUSINESS LAW
Answer 2
Lifting the corporate veil or piercing the corporate veil is the doctrine which is used to
make the duties and rights of the corporation be held as the duties and rights of the shareholders.
It is a fact that the Identity of a corporation is totally different from its members and it is a
separate legal person in the eyes of law. Therefore the losses and liability which is faced by the
Corporation is only limited to the corporation itself and does not extend to its members. The
concept about corporate veil was discussed in the landmark case of Salomon v A Salomon & Co
Ltd [1896] UKHL. In this case it was provided by the court that if a company has not been
formed with a purpose which is fraudulent in nature the corporate veil should not be lifted by the
court. If the company is formed by a proper process of registration it has to be regarded as a
separate legal person. In case the very purpose of the formation of the company was fraudulent
then the court can lift or pierce the corporate veil to hold its member personally liable to the
losses caused to the predators of the company.
In most countries the corporate veil of is lifted or pierced very rarely. In the famous case
of Adams v Cape Industries plc [1990] Ch 433 it was provided by the court that true will
piercing by the court can only be initiated when a company is made for fraudulent purpose or
where an existing obligation is attempted to be avoided by its members. In the case of Prest v
Petrodel Resources Ltd [2013] UKSC 34. There was significant debate in relation to lifting the
corporate veil in the interest of Justice has supported by the judges in the case.

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BUSINESS LAW
Bibliography
Adams v Cape Industries plc [1990] Ch 433
Daimler Co Ltd v Continental Tyre and Rubber Co (Great Britain) Ltd [1916] 2 AC 307
El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4
Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705
Prest v Petrodel Resources Ltd [2013] UKSC 34
Salomon v A Salomon & Co Ltd [1896] UKHL