Veil Lifting in Company Law: Courts' Approach and Principles

This report explores the concept of 'veil lifting' in company law, focusing on the approach of the English courts. It examines the reluctance of the courts to remove the corporate veil and the circumstances under which they may do so to ensure justice and fairness. The report differentiates between the 'evasion principle' and the 'concealment principle,' as outlined in the case of Prest v Petrodel. The evasion principle involves holding organizations accountable for misusing the corporate structure to evade legal obligations, while the concealment principle prevents wrongdoers from hiding behind corporate vehicles. The report uses UK case laws to illustrate the principles of veil lifting, concealment, and evasion in company law.

Running head: COMPANY LAW
COMPANY LAW
Name of the Student
Name of the University
Author Note

1COMPANY LAW
The ‘lifting of the veil of incorporation’ or ignoring the corporate character of any
organization is a trendy practice in the contemporary era of the corporate world. However, the
English courts seldom act on the issues related to this feature of the corporations. The courts
become reluctant when they are asked to remove the corporate veil. Even when the situation
requires the courts to remove the veil of incorporation so that justice and fairness may be
ensured, the courts make an attempt to save the corporate legal body in most of the cases. The
approach of the English courts in the matter of lifting the veil is unwilling.
A classification has been made between the ‘evasion principle’ and the ‘concealment
principle’ in relation to lifting of the corporate veil. This point has explained by the Supreme
Court in the case of Prest v Petrodel1. The Court stated that there has been several
misapplications of the principle of ‘piercing the veil’. Two primary notions regarding this
principle are ‘evasion principle’ and ‘concealment principle’. In the case the Court said that the
‘evasion principle’ refers to a situation where the organization is made accountable when the
distinct legal entity has been utilized to aggravate the legal rights that the other parties may claim
against the owner. It is considered as the strict use of the principle of ‘lifting the veil’. However,
the ‘concealment principle’ is not the same. It refers to a situation when the court does not permit
a wrongdoer to conceal his or her actual identity and accountability for the crimes done by them,
by using corporate vehicles. This is not considered as ‘piercing the corporate veil’. It simply
means that the court is uncovering true information that the organization is trying to hide2.
1 Prest v Petrodel Resources Ltd. & Others [2013] UKSC 34
2 Tan, Zhong Xing. "New Era of Corporate Veil-Piercing: Concealed Cracks and Evaded Issues." SAcLJ 28 (2016):
209.

2COMPANY LAW
References
Prest v Petrodel Resources Ltd. & Others [2013] UKSC 34
Tan, Zhong Xing. "New Era of Corporate Veil-Piercing: Concealed Cracks and Evaded
Issues." SAcLJ 28 (2016): 209.