Corporate Law Essay: Examining Veil Lifting in UK Company Law

This essay explores the legal concept of veil lifting in corporate law, focusing on the approach of UK courts. It examines the landmark case of Prest v Petrodel Resources Ltd and its significance in shaping the understanding of piercing the corporate veil. The essay also considers other relevant UK case law and the Insolvency Act 1986, providing a comprehensive analysis of the circumstances under which courts may lift the corporate veil. It highlights the principle that veil lifting is a last resort, emphasizing the importance of alternative remedies. This essay provides a clear understanding of the legal principles and practical implications of veil lifting in the UK.

Running head: CORPORATIONS LAW
CORPORATIONS LAW
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1CORPORATIONS LAW
Essay:
One of the most distinguishing characteristic of a company is its distinct legal character.
The act done in the name of the company is treated separately from the act of its members and
thus in a company the members are not made liable for the company’s act. This is regarded as
the corporate veil that separates the identity as well as the acts of the company from that of its
members1. This was observed in the case of Salomon v A Salomon & Co Ltd2.
However in some cases this corporate veil may be subjected to piercing or uplifting by
the court to make the directors or shareholders liable for its loans and debts. This was observed
in the case of Prest v Petrodel Resources Ltd3. This case was very significant in the history of the
English company law as it had proposed to pierce the corporate veil must be the last option to be
availed by the court as remedies other than this by means of equity or tort law could affect better
results.
The corporate veil can be pierced in case of any wrong trading by the directors which is
provided in section 214 of Insolvency Act 19864. Further if a company is set up to commit fraud
as seen in Re Darby, ex parte Brougham5 or to evade from a pre-existing duty, then also such
veil can be lifted as seen in Adams v Cape Industries plc6.
1Schall, Alexander. "The new law of piercing the corporate veil in the UK." European Company and Financial Law
Review 13.4 (2016): 549-574.
2 Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22.
3 Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415.
4 Insolvency Act 1986 s 214.
5 Re Darby, ex parte Brougham [1911] 1 KB 95.
6 Adams v Cape Industries plc [1990] Ch 433.

2CORPORATIONS LAW
References:
Adams v Cape Industries plc [1990] Ch 433.
Insolvency Act 1986 s 214.
Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415.
Re Darby, ex parte Brougham [1911] 1 KB 95.
Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22.
Schall, Alexander. "The new law of piercing the corporate veil in the UK." European Company
and Financial Law Review 13.4 (2016): 549-574.