Corporate Veil and Directing Mind

This assignment delves into two fundamental principles of corporate law: 'piercing the corporate veil' and the 'directing mind and will'. It explains how courts may disregard a company's separate legal entity in specific circumstances, holding shareholders or directors personally liable for corporate actions. The assignment also examines the concept of the 'directing mind and will,' which identifies individuals within a corporation who exert significant control and whose actions can be attributed to the company itself. Using case law examples like Tesco Supermarkets Ltd v Nattras and relevant legal scholarship, this assignment provides a comprehensive analysis of these crucial legal concepts.

Directing mind and will
According to the corporations’ law, when a particular person is related with the company, the
conduct of such person can be considered as the conduct of the company if the person can be
conceded as the directing mind and will of the corporation. After considering the facts of each
case, it can be concluded that the person is the directing mind and will of the corporation
(Hansmann, Kraakman and Squire, 2006). Hence, it cannot be inferred only due to the fact that a
particular person is acting as the director of the corporation, data person is the directing mind and
will of such company. The principle of directing mind and will has been incorporated in the
Australian corporations law. In such cases, it can be considered that natural person is an
embodiment of the company. This has been followed by the High Court in a number of cases
where it has adopted the reasoning of Lord Reid that was applied by the court in Tesco
Supermarkets Ltd. v Nattras (1971). Under the circumstances, it is clear that a person acting at a
senior position in the corporation can be described as the directing mind and will commence a
person has the authority to perform as directed and in the interests of the corporation, the
authority has been conferred on a person by the board of directors. For the purpose of identifying
the directing mind and billing case of a particular corporation, it is necessary that the person
taking care of the management and control concerning the act in question should be identified
(Dewey, 1926).

Piercing the corporate veil:
A major advantage that is available in case of the entire duration of the company is related with
the limited liability of its shareholders. However, in certain circumstances, it is available to the
courts to ignore the separate legal identity of the corporation and hold the shareholders or the
directors personally liable. Such a case is referred to as pacing the corporate veil or lifting the
corporate veil. Generally, this method is used to walk towards the liability of the shareholders
regarding the acts of the company (Lederman, 2000). Therefore it can be said that in case of
lifting the corporate veil, the courts are allowed by the law to ignore the separate legal identity of
the corporation. Therefore in such cases, the directors of the shareholders of a particular
company can be held personally responsible for the debts and other obligations of the
corporation. But at this point it needs to be noted that a strong presumption exists against the
piercing the corporate veil. As a result, generally the courts are reluctant to pierce the corporate
veil. Hence the courts are ready to pierce the corporate veil only where serious misconduct has
been, for instance, if there is the abuse of corporate form (Gobert, 1994).
In case of piercing the corporate veil, the court arrives at the decision where the rights and duties
of the company will be treated as the obligations and rights of its members. Generally, due to the
reason that a company is treated as having its own legal identity,, only the company is liable for
its debts and obligations. However, there are certain exceptional circumstances where it may be
decided by the courts that the principle of separate identity should be loaded and the corporate
veil should be lifted.

References
Gobert, J. (1994) Corporate Criminality: Four Models of Fault, 14 Legal Studies 393
Hansmann, H., Kraakman R and Squire, R., (2006) 'Law and the Rise of the Firm', 119 Harvard
Law Review 1333
Lederman, E. (2000) Models for imposing corporate criminal liability: from adaptation and
imitation toward aggregation and the search for self-identity, 4 Buffalo Criminal Law Review
641
Dewey, J., (1926) 'The Historic Background of Corporate Legal Personality' 35 Yale Law
Journal 655
Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1