Company Law: Directing Mind and Will & Piercing the Corporate Veil

This report provides a comprehensive overview of two fundamental concepts in company law: the 'directing mind and will' and 'piercing the corporate veil.' It begins by explaining the 'directing mind and will' concept, primarily associated with Lord Denning's interpretation in H.L Bolton Co. Ltd v. T.J. Graham and Sons Ltd, where the managers' state of mind is considered the company's state of mind. The report then delves into the legal status of a limited business company as a separate legal entity, as per the Corporation Act 2001, and discusses the implications of primary and secondary liabilities. The second part of the report focuses on 'piercing the corporate veil,' which refers to the courts disregarding the limited liability principle to hold shareholders or directors personally liable for the company's debts or actions. The report references the landmark case of Salomon v. Salomon & Co. Ltd, highlighting the principle of separate legal entity. The report concludes with a summary of the legal principles and their practical implications, offering a clear understanding of corporate liability and the circumstances under which the corporate veil can be pierced. The report is well-supported by references to relevant case laws and legal literature.

Company Law 1
Company Law Assignment
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Institution
Date

Company Law 2
Directing Mind and Will
The phrase “directing mind and will” is mainly associated with Lord Denning who
interpreted the phrase in the case of H.L Bolton Co. Ltd v. T.J. Graham and Sons Ltd. The
concept was referred by Denning in the case where he identified managers as the brains that
play a significant role in corporate decision-making (Gurunay, p. 105). According to Lord
Denning, the state of mind of a manager is the company’s state of mind.
According to Section 124 of the Corporation Act 2001, a limited business company
can be regarded as a separate legal entity which possesses similar characteristics as an
individual person. A corporation does not have physical existence, but this does not hinder
the company from complying with the common and statute laws. The company can be held
liable for breaching a contract. In determining the criminal liability of a company, it is
imperative to understand the two types of liability which are primary and secondary. A
company incurs primary liability when it is deemed to have done wrong by itself (Archibald,
Jull & Roach 2003). However, it is also imperative to note that a corporation or a company
does not have the capability for physical action or possessing an intention or ideas and
knowledge which differ from human beings.
To understand better the meaning of the phrase “Directing mind and will," Lord
Denning's ruling in H.L Bolton Co. Ltd v. T.J. Graham and Sons Ltd. In his ruling, Lord
Denning pointed out that the directors and managers of the company were similar to the brain
of a human in a corporation which guides it by “directing their mind and will.” In other
words, the company’s decisions were directed by the directors and managers, which rendered
them guilty as they had also rendered the company guilty. This implies that the phrase simply
means that the decisions taken by managers and directors can be considered to be the
decisions made by the company since the managers and directors are the "brains of the
company, " and the company would act in accordance with their directions.

Company Law 3
Piercing the Corporate Veil
In the Corporation Act 2001, corporations, and LLC are regarded as a legal entity,
separate from their owners. The idea to separate owners from the companies was brought by
the House of Lords in Salomon V, Salomon. In Salomon v. Salomon & Co. Ltd, the House
of Lords, affirmed a legal principle that is applicable today that, once a company is
incorporated, it is considered as a legal entity that is separate from the legal shareholders and
owners (Salomon v Salomon & Co. 1897).
The concept of separate legal entity has been applied in the Australian Corporate law
for over hundreds of years. This legal principle allows companies to act in their own right and
not on the basis of their controllers (Ramsay & Noakes 2001). Shareholders, on the other
hand, cannot be held liable for the debts of a company beyond their capital investment. This
is what is referred to as the corporate veil.
With time, the legal courts have appreciated the fact that the company’s corporate veil
can be “pierced” to deprive the shareholders the protection against the company’s liability as
offered by the limited liability principle. "Piercing the corporate veil," therefore, refers to a
situation where the courts disregard the limited liability principle and hold a shareholder or a
director personally liable for the debts or actions of the corporation as if it were the actions of
the shareholders or directors. In this case, the court disregards the separateness of the
shareholder from the corporation. Such instances arise when the company or the shareholder
request a court to do so due to some circumstance that may necessitate such an action.

Company Law 4
List of References
Archibald, T., Jull, K. and Roach, K., 2003. The changed face of corporate criminal liability.
Crim. LQ, 48, p.367.
Corporation Act 2001
Gurunay, P. The directing mind and will test in corporate criminal liability. International
journal of legal insight. Vol 1 (3).
H.L Bolton Co. Ltd v. T.J. Graham and Sons Ltd. 1957
Ramsay, I. and Noakes, D.B., 2001. Piercing the corporate veil in Australia.
Salomon v Salomon & Co. 1897. AC 22 (Salomon).