Business Law: Veil of Incorporation, Duty of Care, and Company Constitution

Running head: BUSINESS LAW
Business law
Name of the Student
Name of the University
Author Note

1BUSINESS LAW
Answer one
Issue
In the given situation the issue is whether the daughter of Bob has provided him a better idea to
form an organisation under the rules of common law.
Rule
The court has stated in the given case Salomon v Salomon & Co [1897] AC 225 that the
registered organisation is said to be the artificial legal person that states the identity of the
company is not exactly similar as the identity of their owners. After the fusion of the
organisation has been finished in a legal way the artificial legal person of the organisation has
been created. This organisation has the limited liability that states the liability that the company
owes has been not the owner’s liability. A concept of Veil of incorporation protects them (Ben-
Shahar and Porat 2016).
However, the court’s decision has been taken in a conflicting way by other courts in several
other cases. The case Adams v Cape Industries plc [1990] Ch 433 was one such case. In the
given case the judges had stated that the company is said to be the artificial legal person and the
owners of the company are being protected by the idea of veil of incorporation. Though, the veil
of incorporation could be imposed if it is proved in court that the company set with an aim that is
fraudulent or to vanish any prevailing obligation. The court can raise the veil of incorporation if
these actions are complying with interest of the Justice.
The concept regarding the upliftment of Veil of incorporation was recognized by passing the
decision through the court. Several reasons are there because of which the court might raise the

2BUSINESS LAW
company’s veil of incorporation. Some of the cases regarding this are Dennis Willcox Pty Ltd v
Federal Commissioner of Taxation (1988) 79 ALR 267 and Lee v Lee’s Air Farming Ltd (1961)
AC 12.
The idea of integrating veil of incorporation in the state of Australia is taken from English
source. The court has stated in the given case Peate v Federal Commissioner of Taxation (1964)
111 CLR 443 that the court has the power to hold the company's members who has the similar
identity as organisation by uplifting the veil of incorporation in such circumstances when the
organisation turns as a disguise in which the members of the company operate. This states that
the organisation has been created so that the members of the organisation can continue with the
unethical and illegal activities in the protection given through the company’s artificial legal
person.
The phrase piercing the veil of incorporation in the given case Brewarrana v Commissioner of
Highways (1973) 4 SASR 476 was incorporated ironically through the judge. On another side, it
has been stated by the judges in the given case Walker v Humgerfords (1987) 44 SASR 532 that
the idea of uplifting theveil of incorporation has been now outdated.
The court has stated in the given case Pioneer Concrete Services Ltd v Yelnah Pty ltd (1986) 5
NSWLR 254 that the real meaning of uplifting veil of incorporation is when a single
organisation is created then artificial legal person is made but the court on certain situations will
look back the veil of incorporation to perceive it’s actual controllers. In the given case, Briggs v
James Hardie & Co Pty Ltd (1989) 16 NSWLR 549, the court had rejected the upliftment of the
veil of incorporation. The court had stated that the upliftment of the veil of incorporation can be
done if the organisation is integrated to prevent the legal obligation.