LAW4 Business Organization Essay: Directing Mind & Corporate Veil

This essay delves into two crucial concepts within the Law of Business Organization: 'directing mind and will' and 'piercing the corporate veil'. The 'directing mind and will' concept identifies individuals who control and manage a company's affairs, essential for both civil and criminal cases, as illustrate...Read More

Law of Business Organization
Part 2
19-Sep-17
(Student Details: )

LAW OF BUSINESS ORGANISATION 2
Part 2
a. Directing Mind and Will
The phrase directing mind and will is used to denote the natural person identification that has
the actual control and management over the affairs of the company. As a company is
considered as a separate legal person and yet, its affairs are conducted through the natural
persons, who have a certain state of mind and act in a manner, which directs the actions of the
company (Hudson, 2017). Through the use of this concept, these very individuals are identified.
This phrase is used in context of both civil and criminal cases. For instance, this concept was
used in the cases of Citizens United v. Federal Election Commission 558 U.S. 310 (2010) and the
contextualization of this concept was done by Lord Hoffman in Meridian Global Funds
Management Asia Ltd v Securities Commission [1995] UKPC 5 (Ferran, 2012).
Tesco Supermarkets Ltd v Nattrass [1972] A.C. 153 HL is another crucial manner where this
concept was used by Lord Ried who stated that the directing mind and will test required the
living person to be identified, who could be considered as the personification of the company.
In this case, it was held by the court that the store manager was not responsible for directing
the will and mind of the company as the company had undertaken all the steps to avoid the
offence from being committed, and the fault of another employee led to this offence. As a
result of this, the company was not held liable (Bailii, 2017).

LAW OF BUSINESS ORGANISATION 3
b. Piercing the Corporate Veil
One of the features of a company is that it has a separate legal entity status from the ones who
run its operations. And so, the individuals who run the business are not made liable for the acts
done by the company and same is true vice versa (Anderson, 2008). However, at times it
happens that the individual who run the business of the company, do it in such a manner, so as
to avoid their personal liabilities and use the “corporate” as a “veil” for their acts. So, in cases
where the court deems it just and fair, with regards to delivering justice, they pierce the
corporate veil of the company and hold the ones behind this veil, liable for the acts undertaken
through the concept. The initiation of this concept was done in the matter of Salomon & Co Ltd
[1897] AC 22 whereby the defendant was made liable for the debts undertaken by the
company, through the incorporation of this concept (McLaughlin, 2015).
Creasey v Breachwood Motors Ltd [1993] BCLC 480; 10 ACLC 3,052 is amongst the numerous
examples in which the courts have pierced the corporate veil of the company, for upholding
justice. In this case, the corporate veil was pierced so as to determine the ownership of the new
company and the shareholders of such new company as the new company had been formed
just for avoiding the liabilities of the old company, under the tort of negligence (French, Mayson
and Ryan, 2016).

LAW OF BUSINESS ORGANISATION 4
References
Anderson, H. (2008) Directors’ Liability for Unpaid Employee Entitlements: Suggestions for
Reform Based on their Liabilities for Unremitted Taxes. Sydney Law Review, 30(470).
Bailii. (2017) Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1 (31 March 1971). [Online] Bailii.
Available from: http://www.bailii.org/uk/cases/UKHL/1971/1.html [Accessed on: 19/09/17]
Ferran, E. (2012) Corporate Attribution and the Directing Mind and Will. [Online] University of
Cambridge. Available from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2025884
[Accessed on: 19/09/17]
French, D., Mayson, S., and Ryan, C. (2014) Mayson, French & Ryan on Company Law. 31st ed.
Oxford: Oxford University Press.
Hudson, A. (2017) Understanding Company Law. 2nd ed. Oxon: Routledge.
McLaughlin, S. (2015) Unlocking Company Law. 3rd ed. Oxon: Routledge.