Business Law Assignment: Veil of Incorporation and Business Structures

This assignment delves into key aspects of business law, focusing on the 'veil of incorporation' and its implications, examining the circumstances under which courts may hold directors and members personally liable for their actions. It critically evaluates the advantages and disadvantages of different business structures, including sole traders, partnerships, and private limited companies, providing a comprehensive overview of each. The assignment also outlines the process of incorporating a private registered company, detailing the necessary documents, fees, and relevant addresses for submission. Through case studies and legal analysis, the document explores the complexities of business law, offering insights into corporate structures, legal liabilities, and regulatory frameworks. The report includes relevant case laws to support arguments and explain the concepts in detail. This assignment, published on Desklib, provides students with a comprehensive understanding of core business law principles and practices.

Business Law

Table of Contents
INTRODUCTION...........................................................................................................................3
PROJECT TWO- PART ONE.........................................................................................................3
Critically evaluate the circumstances when courts have been prepared to lift the ‘veil of
incorporation’ and hold directors and other members personally responsible for their actions..3
PROJECT TWO- PART TWO........................................................................................................6
Outline and critically evaluate the advantages and disadvantages of setting up business as a
sole trader, a partnership or a private limited company...............................................................6
Explain how to incorporate a private registered company. Include an explanation of the
relevant documents she will need along with fees and relevant addresses where the
documentation will be sent..........................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Discussing about the business law, it is a law and regulations which is very important in
present scenario for the purpose of performing any of the business activity. The law ensures that
any of the business organisation follows every form of guidelines which can keep them alive
within the competition which is crucial in current scenario. This guideline is very much
important because it directly or indirectly allows business organisation to perform better through
which goals can be accomplished easily. In context of the file, it has been categorised into two
part. There will be different case laws and judgement which will support at the time of
explaining the concept. First part will be based on veil of incorporation and how it can hold
director as well as other member personally liable for the action taken by them.
PROJECT TWO- PART ONE
Critically evaluate the circumstances when courts have been prepared to lift the ‘veil of
incorporation’ and hold directors and other members personally responsible for their actions.
Veil of Incorporation: It is explained as one of the most important concept within the
Company law which simply discusses that how any of the business activity is required to be
performed. Also, it mainly says that any of the business entity is separate from its member where
they are required to follow certain guidelines through which goals can be accomplished. The
concept of limited liability allows the investors and director to take effective decision through
which goal can be accomplished easily which is the most important within this concept.
It is one of those concept which helps the organisation to recognise as legal entity and gives the
rights of legal existence within the market. This concept allows the investor to show their interest
within the organisation through which their goals can be accomplished. Here, if any of the
problem occurs then company is made liable because members where just playing the supportive
role through which targets can be achieved within the specific time period (Bodansky, 2016). In
this particular concept, it is necessary to understand that company at the time of performing
business activity, the liability of member will be only up to the amount of invest which has been
made by them. The concept of separate legal entity was introduced from one of the most
important case which was held between Salomon v Salomon 1897. This was the case where
creditors of the company raised the question that Salomon is not giving them their money where
Salomon was able to express that he is just an director of a company and both of distinct from

each other in current scenario. It is necessary to understand that it is among one of those concept
which plays the significant role in current scenario where all of the organisation work in the basis
of separate legal entity. One of the famous case was between Lee v Lee which simply discusses
that any of the person who is the part sole director of a company can also form the contract of
employed. It is among one the important concept where discusses about the employee
compensate when it can be given to its customers.
Again, discussing about Veil of incorporation, it is necessary to understand that there are
still some of the situation where director or member of the company is made liable and they are
legally penalised for each and every action taken by them. So, in this respective situation, it is
necessary to understand that each and every employee who has been performing any of the
business activity should be able to take those decisions which will create issues for the business
entity (Endicott, 2016). At initial level, it is said that company is made liable in it but later on if
organisation faces any of the problem then in that respective situation they can take the help of
court where veil of corporate can be lifted. It can be lifted within the premises of court. But,
there are some of the restrictions for court as well and according to that there are some of the
situation where veil of corporation can be lifted. The restriction was introduced in one of the
landmark case between Adams v Cape Industries 1990. It was among one of the case where it
was found that Court of appeal and the defendant was part of a group of companies and
attempted to take advantage of its corporate structure to reduce the risk that any member of the
group would be subject to US law and thus liable for injury caused by asbestos. The situation
where veil can be lifted has been explained below:
 The first thing which is mandatory to be seen or considered is that under what respective
case falls. It is because there are some of the case where cases fall under agency or trust.
Except agency or trust law any of the company related cases can lift up the corporate veil
and even it can have held member a personally liable in this particular situation. Sone of
the famous cases in this particular situation are Gramophone & Typewriter Co v Stanley
1908; Smith, Stone & Knight v Birmingham Corporation 1939; Firestone Tyre and
Rubber Co v Llewellin 1957 (Alfawaer, 2017).
 Economic reality is one of the situation which simply says that any of the business
organisation which performs its business activity might sometimes hide its daily basis

activity. In this respective condition, principal of Salomon do not works so in order to
look a detail overview of the company and find about the actual position of the
organisation, it is necessary that court must lift the veil so that they can find about the
actual position of the company. DHN Food Distributors v Tower Hamlets LBC 1976;
Adams v Cape Industries plc 1991 (Partington, 2019). This are some of the famous case
where court found that corporate of veil can be listed. In this case, the three subsidiary
companies where counted as the part of subsidiary company and even penalty was
imposed which was compensated by organisation.
 Corporate Fraud: It is one of the situation where court majorly focuses for the purpose of
lifting the veil. It is well known that organisation is an artificial person and there is no
possibilities that fraud will be performed by the organisation. If any of the fraud will be
performed by the business organisation, then court has the right to take action by
themselves in order to determine that who is the real defaulter behind the scene. So, that
legal penalty can be imposed upon them. Some of the cases where court has lifted the
veil are – Jones v Lipman 1962; Gilford Motor Co Ltd v Horne 1933; Creasey v
Breachwood Motors 1992 (Feres, Silva and Silva, 2018). This are some of the famous
case where court has lifted the veil in order to identify the real person behind the default
that from whose side it has been performed so that any of the problem will not occur in
any of the situation. In addition, Prest v Petrodel 2013, is one of the landmark case where
concept was changed and it was expressed that veil can be lifted in that particular situation where
any of the employee of a company is under legal obligations.
 The last and final place where court can directly uplift the corporate veil is that where
statute law is not followed by the organisation due to which company starts to face the
problem. Court can lift in the situation where guidelines of Insolvency Act, 1986 and
some of the section like 213 and 214 has been breached.
In simple words, these are some of the important area where court can lift the veil and as per
my opinion this are favourable and adequate. This can be effective and it will certainly reduce
the percentage of case where laws and regulation has been breached by member of the company.

PROJECT TWO- PART TWO
Outline and critically evaluate the advantages and disadvantages of setting up business as a sole
trader, a partnership or a private limited company.
In present scenario, there are different form of business which a person can perform
either solely or by involving within the group. It is necessary to understand that whenever they
perform it then it should be performed in a systematic manner and if they fail to do seen it
becomes difficult work to attain any of the goals. In current scenario, whenever any of the
investor invest within the company they focus on its advantages and disadvantages so that aims
and objectives can be determined. In the view of investors, some of the business types has been
discussed below with their major advantages and disadvantages.
Sole Trader: It is one of the form of business which is small in size but it has a great
future in context of the employee. This types of business are very small and even it is said
workload in it is very less due to which investor finds easy to perform its business activity in an
effective manner. Any of the invest who is willing to start any of the sole trader must understand
that they must be able to start any of the sole trader because it will simply allow them to grow at
a healthy speed. It is one of those business activity which is performed by single person only. It
means that the one who is going to invest within this form of business will have to perform all of
the business activity alone and even there will not be any of the person who will interfere at the
time of making decision which allows the sole trader to take their decisions of own for
accomplishing the goals (French, 2018). In this form of business, there are number of benefits
which investor can get such as they will get the chance to enjoy all of the profits along. In this
types of business, investor will also get the opportunity to take their decision of own. But,
drawback of this business is that even after investment, organisation will not get the rights of
legal existence in the eye of law due to which liability will be unlimited in this form of business.
Partnership: The form of business which is needed to be formed with the help of
guidance of other people is known as partnership firm. This types of business are small in size
while talking about the member who can connect with it. Any of the entrepreneur must form a
partnership in those particular situation where number of members are more than 1. It allows to
take decision after having the group discussion which is the most value able and important point
in this types of business. It is necessary to understand that in any of the situation this types of

businesses are helpful in the growth of small investor due to which goals and target can be
accomplished easily. There are number of benefits which can be seen in this types of business
where first benefit is that liability and work can be distributed among all of the members who are
connected with the organisation. In the same manner, while talking about its drawback, this are
those form of business where profit is also needed to be shared among the member and even
liability is not limited in it. It is necessary to take each and every decision by overviewing the
situation so that goals can be accomplished.
Company: It is the form of business where work is performed at a greater platform as
compared to other form of business. It is necessary to understand that in any of the situation
those goals and target should be met. In this types of businesses, it is said that all of the decision
are required to be taken as per the guideline of laws and regulations which is helpful in some of
the situation and sometimes it creates problem too (Musson, 2018). Whenever any of the
entrepreneur have proper team, and even they want to work as a greater platform by hiring
number of employees under them then in that respective situation they should be able to form
company which can allow them to attain their goals and target within the specific time period.
The main benefit of forming this type of business is that liability is always limited in it which
allows the investor to work freely in it. It is that types of business which can attract more number
of people because of the concept of limited liability. It is that concept which simply explains that
where invertors liability will be only up to the amount of investment which they had made.
In present scenario, looking at different types of business activity, it can be said that
company is more suitable option because of the number of benefits which it gets. Firstly, this
types of business will get the opportunity to raise fund from market at any period of time,
investor and join and left the organisation and still company can perform its business activity
smoothly. Although, there are number of types of benefit which can be seen within this types of
business but still it is necessary to understand that in this form of business wider level of
guidelines is required to be followed which sometimes create issues which is needed to be
resolved (Shen, 2018). The major drawbacks in this types of business are that company should
be able to maintain account as per the requirement of accounting standards. Secondly, there are
number of legislative guidelines which creates issues for small company because problem related

to financial crisis started to occur at every short interval of time. This are some of the major
problem within this form of business.
Explain how to incorporate a private registered company. Include an explanation of the relevant
documents she will need along with fees and relevant addresses where the documentation will be
sent
In present scenario, entrepreneurs want to start a company but before that they should be
able to decide that in any of the situation company should be registered in a lawful manner which
is very much important in current scenario. In the same manner, if any of the private company is
required to be commenced then there are some of the basic guidelines of statutory law which is
needed to be considered. Below those guidelines has been discussed in detail for better
understanding of the topic.
 Selection of Name and address: The first thing which is required to be done by the
member of private limited company is that they should be able to decide the name of
organisation and that name should not match with existing organisation (Qunran and
Chen, 2019).
 Memorandum of Association: It is the second most important stage within any of the
process of formation of company where it mainly discusses about some of the important
clause such as object clause, liability clause, capital clause and many more. This is
required to formed as per the guidelines of law.
 Article of Association: It is the form of documents which is prepared by entity where
they discuss that how any of the entity is required to be formed. Some of the rules and
regulations are mainly included in it which helps the people to understand that how any
of the work is needed to be done (Schauer, 2019).
 Form IN01 – the Application for Registration: It is one of the form of Company House
which simply discuss that how any of the organisation is required to be formed as per the
guideline of Company Act 2006.
 Registration fee: Whenever any of the business organisation, is required to perform its
business activity, they are needed to register a company. In this particular situation, £12
is required to be paid a part of registration fee.

Finally, when all of the documents are prepared it is necessary to understand that company is
still not ready to perform its business activity as there is the requirement to submit all of the
documents within the company’s house. Once it is submitted, member will get the right to
perform the business activity in smooth manner. In short, this is the detail procedure which is
required to be followed by private limited company for the purpose of accomplishing the goals.
CONCLUSION
In the lights of above discussed provisions and law, it is simple to discuss that law is needed
to be followed where all of the guidelines must be followed in order to accomplish the goals and
target on specific time period. The concept of veil of incorporation allows the court to take legal
action against members and director where they are made personally liable for any of the
decision. In this concept organisation get the opportunity to recover damages from its members.
Several types of organisation are there where all of them have some of the benefits and
drawbacks which must be considered for making crucial decisions. Also, private companies have
been playing crucial role in current scenario and it is necessary that proper guidelines are
required to be followed for the purpose of incorporating the organisation.

REFERENCES
Books & Journals
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Musson, A., 2018. Medieval law in context: the growth of legal consciousness from Magna
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Shen, G., 2018. Revision of China's Legislation Law: Towards a More Orderly, Fair and Just
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