Business Law: Directing Mind, Corporate Veil, and Relevant Cases

This report delves into the core legal concepts of business organization, specifically focusing on the 'directing mind' and the 'lifting of the corporate veil.' It explains how the 'directing mind' of a company, often its directors, is crucial in decision-making and how their actions can bind the company. Th...Read More

Running Head: LAW OF BUSINESS ORGANIZATION
Law of business organization

LAW OF BUSINESS ORGANIZATION 1
Directing mind and will
A company is not a natural person. It is an artificial person which is incorporated by its members
the company has a separate legal entity and rights and duties like a natural person which are
different from his members but simultaneously it can merely perform through its members. The
key personnels of the company are known as directors who regulate the company and considered
as mind and will of the company. Their capability to tie a company originates from the contract
of the agency. Through the express actual authority, implicit actual control or apparent authority
An employee can also bind the corporation. If an employee of the company has taken an action
beyond its power, but the corporation desire to be tied to the act of the employee, such company
can give approval to such act of the employee.
The Western Australian Supreme Court recently gave the decision related to a key
personnel’s liability for the action of the company in situations where the company was
prosecuted by investors that lost their assets in an investment plan (Sugarloaf Hill Nominees Pty
Ltd v Rewards Projects Ltd (2011)WASC).
The Supreme Court of Victoria held that the senior person is the directing mind and will
of a company whose power is derivative from the company's board of directors who will perform
for the company and for the interest of the company or any employee can be the companies’
mind and will if such employee performs under the authority (ABC Development Learning
Centres Pty Ltd v Wallace(2006)VSC 171).
.

LAW OF BUSINESS ORGANIZATION 2
Lifting the Corporate Veil
A corporation has distinguished legal personality and they cannot be entitled to the liabilities of
the company, not more than its stake( Salomon v A Salomon and Co Ltd (1897) AC 22) But
simultaneously, a company a juristic person whose all the decisions are taken are by its directors
and stakeholders. In the case of lifting the corporate veil, the court struck down the limited
liability part and held all directors and shareholders of the company individually liable for
company’s activities. The court did not consider the separate personality of the company and
make the stakeholders responsible for the act of such body like such activities were done by the
stakeholders. The piercing and lifting of the corporate veil are different processes in which
piercing is considering the right and responsibility of company as stakeholder’s rights and
responsibility. Lifting is observing beyond the company to identifying the stakeholders, for the
lawful purpose
(Atlas Maritime Co SA v Avalon Maritime Ltd (No 1) (1991) 4 All ER 769)
The need of such process known as lifting the corporate veil came into existence because
the company was using corporate veil as a shield to defend themselves. The reasons behind
piercing the corporate veil contain recognition of actual owners, deception, injustice, and
observing member’s liability when the responsibility arises. In the current instance, the court has
laid down the need of the doctrine of piercing of corporate veil to reduce the cases related to
fraud where members of the company are using limited liability clause as a shield
(Prest v Petrodel Resources Ltd (2013) 2 AC 415.)

LAW OF BUSINESS ORGANIZATION 3
References
ABC Development Learning Centres Pty Ltd v Wallace(2006)VSC 171
Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd (2011)WASC
Salomon v A Salomon and Co Ltd (1897) AC 22
Prest v Petrodel Resources Ltd (2013) 2 AC 415.
Atlas Maritime Co SA v Avalon Maritime Ltd (No 1) (1991) 4 All ER 769.