Law of Business Organization Report: Directing Mind and Corporate Veil

This report delves into two critical concepts within business law: the 'Directing Mind and Will' and 'Piercing the Corporate Veil.' The 'Directing Mind and Will' doctrine identifies the senior individuals within a corporation, often directors or managers, who are authorized to act on behalf of the company. The report explains that these individuals can be held personally liable for actions outside their mandate, particularly in criminal cases, where the doctrine of identification is used to assign responsibility. The second concept, 'Piercing the Corporate Veil,' addresses the legal principle that separates a corporation's identity from its shareholders, shielding them from the company's debts and wrongdoings. However, the report highlights that this protection is not absolute, and courts can 'pierce the veil' to hold shareholders liable in cases of serious misconduct, undercapitalization, or abuse of the corporate form. The report also discusses common situations where the corporate veil may be pierced, such as commingling of funds and failure to maintain proper records. Finally, the report includes references to relevant legal resources.

Law of Business Organization

Table of Contents
Directing Mind and Will..................................................................................................................3
Piercing the Corporate Veil.............................................................................................................3
References........................................................................................................................................4

Directing Mind and Will
‘Directing mind and will’ of any corporation is the senior most person who has been given the
authority by the corporation’s board of directors (BoD) to perform certain functions that will
benefit the company. He/she has the authority to act or perform certain actions that are in his/her
mandate and if he/she performs any act that is outside his/her mandate then he/she is accountable
and personally liable. In criminal cases, the organization can be prosecuted if found guilty but
this is ineffectual because the organization cannot be imprisoned or punished. The company is
often penalized and is freed with minimal monetary fine. Thus to affix this, the Doctrine of
Identification was promoted to punish the ‘directing mind and will’ of the company who run the
company and are responsible for committing any crime (Park, 2015).
This theory experienced growth in the 20th century which explains that the state of the mind of
the managers or senior executives is the mind of the company. The company is equated with
human body having human brain and will. In criminal cases, the law punishes the guilty mind
and hence in companies the guilty mind of the directors or mangers must be held responsible.
The director or agent who is the ‘directing mind and will’ of the company and is the main
personality of the organization is held responsible for any involvement of illegal or criminal
activities by the company. The main aim of this doctrine is to punish those offenders who are the
mind and will of the company and must be held responsible for any offence committed by the
company (Mirajgaoker, 2011).
Piercing the Corporate Veil
The phrase ‘piercing the corporate veil’ is a legal concept which actually refers to the removal or
separation of the personality of the corporation from the personality of the shareholders and

shields them from any debt or wrong doing of the company. However, this shield is not
impenetrable and the court can pierce the veil and prove them liable.
‘Piercing the corporate veil’ is used when the court holds a corporation’s share holders
responsible for the debts or actions of the corporation. Veil piercing is very common generally in
close corporations and is done when a serious crime, misconduct, under capitalization or abuse
of the corporate form is done. The main benefit of incorporating a firm is to limit the liabilities
of the shareholders. However, in certain circumstances the corporate veil is pierced and the
shareholders are held responsible for the acts of the corporation (Cornell Law School, 2017).
Generally, the directors and officers of corporate must abide by the laws and have ethical
responsibility. In certain cases, they act in bad faith and breach the code of conduct and perform
acts of negligence, but usually they are not held responsible and have no personal liabilities to
third parties. In such instances the third parties have to prove their misconduct, fraud or
demeaning actions and then the court will held them personally responsible for such acts. The
most common actions in which the corporate veil is pierced are co-mingling of funds, failing to
keep records, diverting business assets for self and personal use, and officers or directors not
performing their duties and functions (Murray, 2016).
References
Cornell Law School, 2017. Piercing the Corporate Veil. [Online] Available at:
https://www.law.cornell.edu/wex/piercing_the_corporate_veil [Accessed 18 september 2017].
Mirajgaoker, N., 2011. Doctrine of Identification. [Online] Available at:
http://www.legalservicesindia.com/article/article/corporate-criminal-liability-doctrine-of-
identification-488-1.html [Accessed 18 September 2017].
Murray, J., 2016. Piercing the Corporate Veil - What Business Owners Need to Know. [Online]
Available at: https://www.thebalance.com/piercing-the-corporate-veil-definition-398410
[Accessed 18 september 2017].

Park, G., 2015. Directing the mind and will of the company. [Online] Available at:
https://prezi.com/fvvr3wp32za3/directing-the-mind-and-will-of-the-company/ [Accessed 18
September 2017].