Directing Will and Corporate Veil

This report delves into two crucial aspects of corporate law: the 'directing mind and will' doctrine and the concept of 'piercing the corporate veil.' The 'directing mind and will' refers to individuals within a corporation whose actions bind the company, potentially leading to personal liability for actions outside their authority. The report uses case law such as *Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd* and *ABC Development Learning Centres Pty Ltd v Wallace* to illustrate this principle. The second part focuses on 'piercing the corporate veil,' a legal mechanism that allows courts to disregard the separate legal personality of a company and hold its shareholders or directors personally liable for its debts or actions. The report contrasts this with 'lifting the corporate veil,' which involves looking behind the corporate structure for identification purposes. Cases like *Salomon v Salomon & Co. Ltd* and *Prest v Petrodel Resources Ltd* are analyzed to highlight the conditions under which courts might pierce the veil, often in situations involving fraud or injustice. The report concludes by summarizing the key differences and implications of these two legal doctrines.

Running head: DIRECTING WILL AND CORPORATE VEIL 0
Law of Business Organisation

DIRECTING WILL AND CORPORATE VEIL 1
Table of Contents
Directing Mind and Will............................................................................................................2
Piercing the Corporate Veil........................................................................................................3
References..................................................................................................................................4

DIRECTING WILL AND CORPORATE VEIL 2
Directing Mind and Will
A corporation is considered as an artificial person, incorporated by its members. It has a
separate legal entity but its actions are taken by its directors or shareholders. The directors of
the corporation are known as key managerial personals, and they are considered as the mind
and will of the organisation. The contract of agency gives directors their power to operate a
company. An employee can also act as mind and will of a corporation, if the act is performed
under express authority, implied control or obvious power. As per Wheelwright (2006), the
directing mind and will can be considered as any employee who performs certain acts under
the authority. They can be held personally liable for the actions performed by them outside
their authority, but the company can rectify such act by giving approval.
In case of Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd (2011) WASC, the court
held that key managerial personals are personally liable for the company’s acts when
investors sued the corporation for the forfeiture of their assets due to company’s scheme. In
ABC Development Learning Centres Pty Ltd v Wallace (2006) VSC 171 case, senior
employees considered as directors mind and will if their powers are derived from BOD, and
they perform their actions for corporation’s interest (Freckelton 2006).

DIRECTING WILL AND CORPORATE VEIL 3
Piercing the Corporate Veil
An organisation has a distinct legal personality from its owners, and they cannot be held
liable for the liabilities of the corporations, for more than their share, as provided in the
historic case of Salomon v Salomon & Co. Ltd [1897] AC 22. But at the same time, a
company is an artificial person whose actions are operated by directors and shareholders.
According to Lam (2015), piercing the corporate veil is the situation where court set aside the
limited liability clause and makes directors and shareholders individually responsible for
company’s actions. The court ignores the distinctiveness of the company and holds the
shareholders liable for the acts of the organisation as if they were performed by the
shareholders. The Atlas Maritime Co SA v Avalon Maritime Ltd (No 1) [1991] 4 All ER 769
case provides the difference among piercing and lifting of corporate veil is that piercing is
related to treating the right and liability of company as shareholder’s rights and liability.
Lifting is looking behind the corporation to identifying the shareholders, for any legal
purpose.
The requirement of the principle of the corporate veil was introduced because corporations
used corporate veil as a shield to protect themselves. The reasons for piercing the corporate
veil include identification of real owners, fraud, injustice, and realising people’s liability at
the time of debt. In the recent case of Prest v Petrodel Resources Ltd [2013] 2 AC 415, the
court established the necessity of doctrine of piercing of corporate veil to avoid any fraud or
injustice to the people by using corporation’s limited liability clause as a shield (Okoli 2014).

DIRECTING WILL AND CORPORATE VEIL 4
References
Freckelton, I., 2006. Vicarious liability and criminal prosecutions for regulatory
offences. Journal of law and medicine, 14(1), pp.24-26.
Lam, C.L., 2015. Piercing the Corporate Veil.
Okoli, C., 2014. English courts address the potential convergence between the doctrines of
piercing the corporate veil, party autonomy in jurisdiction agreements and privity of
contract. Journal of Business Law.
Wheelwright, K., 2006. Goodbye directing mind and will, hello management failure: a brief
critique of some new models of corporate criminal liability. Australian Journal of Corporate
Law, 19(3), pp.287-303.