Corporation Law: Liability of Parent Company, Piercing the Corporate Veil, and Constitution of a Company

Running head: CORPORATION LAW
Corporation Law
Name of the Student
Name of the University
Authors Note
Course ID

1CORPORATION LAW
Answer 1
Issue
The issue in the situation is that whether Bob's daughter has given him a good idea to
create a company under the provisions of common law.
Rule
In the case of Salomon v Salomon & Co [1897] AC 22 it was held by the court that
registered company is a separate legal entity which means that its identity is not the same as
its owners. Once the incorporation of company is completed in a valid manner its separate
legal entity is created. This company has a limited liability which means that the liability
which is owed by the company is not the liability of its owners. They are protected by a
concept which is known as corporate veil.
However this decision of the court has been interpreted in a contradictory manner by
various other court in different cases. One of such case was the case of Adams v Cape
Industries plc [1990] Ch 433. In this case it was quoted by the judge that a company is a
separate legal entity and its owners are protected through the concept of corporate veil.
However the veil can be pierced in case it is established before the court that where an
organisation has been set up with an objective which is fraudulent in nature or in order to
evade any other existing obligation. The corporate veil can be lifted by the court in case such
actions are in the interest of Justice.
Through the passing of this decision by the court the concept in relation to lifting the
corporate veil had been established in the corporate world. There was various number of
reason because of with a Court May lift the corporate veil of a company. Few of these cases
are the case of Lee v Lee’s Air Farming Ltd (1961) AC 12 and Dennis Willcox Pty Ltd v
Federal Commissioner of Taxation (1988) 79 ALR 267.

2CORPORATION LAW
The concept of piercing the corporate veil in Australia has been adopted from the
English approach. In the case of Peate v Federal Commissioner of Taxation (1964) 111 CLR
443 it had been stated by the court that it is within the power of the court to hold that the
members of the company have the same identity as the company by lifting the corporate veil
in situation where the company only acts as a mask under which its members operate. This
means that the company has only been incorporated so that their members can continue
illegal and unethical activities under the protection provided by the separate legal entity of the
company.
In the case of Brewarrana v Commissioner of Highways (1973) 4 SASR 476 the word
piercing the corporate veil was ironically integrated by the judge has no fashionable. On the
other hand in the case of Walker v Hungerfords (1987) 44 SASR 532 it had been provided by
the judge that the concept of lifting the corporate veil is now out of date.
In the case of Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254
it was ruled by the court that the actual meaning of lifting the corporate veil is that in
situation where an individual company has been created a separate legal entity is formed
however the courts will on certain occasions look behind the corporate veil to see it's real
controllers. The lifting of Corporate veil by the court was rejected in the case of Briggs v
James Hardie & Co Pty Ltd (1989) 16 NSWLR 549 however it was stated by the code that
the corporate veil may be lifted if the company has been incorporated to avoid a legal
obligation.
Application
It has been provided in the facts of the case that through the provisions of the
protective legislation it is illegal for any person to catch more than 50 tons of scallops in a
year. In addition the marketing authority is also under the restriction of purchasing 50 tons of