Corporate Liability and Veil Piercing

This legal assignment explores the concept of corporate liability under criminal law, focusing on the 'directing mind and will' theory. It examines landmark cases like Lennard's Carrying Co. Ltd v Asiatic Petroleum Co Ltd and El Ajou v Dollar Land Holdings plc to illustrate the application of this doctrine. The assignment also delves into the separate legal entity principle established in Salomon v Salomon & Co, discussing its significance and exceptions like piercing the corporate veil. Real-world examples are used to highlight the practical implications of these legal concepts.

Running Head: Law 1
Law

Law 2
Part A
Corporate liability under criminal law define the extent up to which organization as legal entity
can be held liable for the acts committed by natural person employed by the company. It must
be noted that identification doctrine can be considered as main rule for the purpose of
determining the liability of organization under both civil and criminal law for the wrong acts
committed by the agent of the corporation and servants of the company. This theory states that
mind of the natural person who control and manage the affairs of the corporation can be
considered as the mind of the company itself. Therefore, this doctrine is also known as the
doctrine of directing mind and will.
This theory is developed in case law Lennard’s Carrying Co. Ltd v Asiatic Petroleum Co Ltd.
This case was determined by the House of Lords and they determine the question whether owner
of the ship can be held liable for the loss of cargo because of the wrong navigation of one of its
ship. In this case, Viscount Haldane held that liability related to the actual fault would not lie on
the servant and agent only but it also lie on the company because action of the servant and agent
of the company can be considered as the action of the company itself. Therefore, in this case
Court applied the directing mind and will theory (Lim, 2011).
After sometime in case law Daimler Company Ltd v Continental Tyre and Rubber Company
(Great Britain Ltd), it was confirmed by Lord Atkinson that residence place of the was the place
from which the directing mind and will of the company will be controlled by its officers and
agents. However, it is important to note that approach of Lennard’s case is not applied in this
case and approached used by Judge in this case is not the identification theory but just the
agency law.

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There is one more case law which clarify the concept of directing mind and will that is El Ajou
v. Dollar Land Holdings plc. In this case, Court of Appeal applied the theory of directing mind
and will in more flexible way. Court further stated that it is necessary to identify the natural
person who manage and control the affairs of the company because these persons are those who
actually directs the company.
Part B
In case Salomon V Salomon, Court identified the fundamental principle of separate legal entity.
As per this principle company is considered as separate legal entity in the eyes of law which has
its own rights and obligations. In other words, identity of members are not mixed with the
identity of the company, which means company is considered as separate legal person.
This principle of separate legal entity has been adopted from various years, and it states that
company has its own rights and not it not just the puppet of its holders. Shareholders of the
company are not liable for any debts incurred by the company and they can be held liable only to
the extent of their capital investment. Similarly, shareholders does not have any right and interest
on the property of the company.
On similar time, Court consider the concept of piercing of corporate veil of a company for the
purpose of rejecting the protection of shareholders related to limited liability. Piercing of
corporate veil is considered as exception of separate legal entity and under this concept Court

Law 4
reject the separate personality of the company and held the shareholders liable for the company’s
debt. Veil can be pierced by the company either at the request of the company itself or
shareholders of the company for the purpose of providing the remedy that would not be provided
otherwise. This remedy provides an enforceable right or reduce the penalty. In Salomon case,
Australian Court state the exception of this case and pierce the corporate veil for determining the
actual position of the company.
It must be noted that piercing of corporate veil is done in very rare and exceptional situations,
and law does not define any particular situations under which veil can be pierced. In other words,
no specific situations and matters are considered by the Court for piercing the corporate veil.
Generally, Court pierce the corporate veil when there is any fraud and dishonest intention of the
members of the company, and when directors and other officers use the identity of the company
for their own benefit.

Law 5
References:
Lim, Ernest, (2011). A Critique of Corporate Attribution: 'Directing Mind and Will' and
Corporate Objectives. Journal of Business Law 333.
Goode, M. Corporate criminal liability. Viewed at:
http://www.aic.gov.au/media_library/publications/proceedings/26/goode.pdf. Accessed on 19th
September 2017.
El Ajou v. Dollar Land Holdings Plc, (1993) EWCA Civ 4.
Salomon v Salomon & Co [1897] AC 22 (Salomon).
Ramsay, I. & Noakes, D. (2001). Piercing the Corporate Veil in Australia. Viewed at:
http://law.unimelb.edu.au/__data/assets/pdf_file/0008/1710089/122-
Piercing_the_Corporate_Veil1.pdf. Accessed on 19th September 2017.