Corporate Law: Directing Mind and Piercing the Corporate Veil Analysis

This report provides an analysis of two crucial concepts in corporate law: 'directing mind' and 'piercing the corporate veil.' The 'directing mind' refers to the individuals within a company whose actions and decisions are considered the company's own, primarily based on the principle of the company's directing mind and will. The report highlights the importance of identifying the person in the senior position of the company. 'Piercing the corporate veil' is the legal process of disregarding the separation between a corporation and its shareholders, making the shareholders or directors personally liable for the company's debts or actions. The report also notes that courts are generally reluctant to pierce the corporate veil and do so only in cases of serious misconduct. References to supporting legal literature are provided.

Directing mind and will
Under the common law, the conduct of particular person who is related with the company, can be
attributed to the company if it can be said that the person is the directing mind and will of
company. This needs to be established on the basis of the facts of the case. Therefore, merely on
the basis of the fact that a particular person is a director of the company, it cannot be inferred that
such person is the directing mind and will of the company. The Australian law is mainly based
on the principle of "directing mind and will" as in this case, natural persons can be considered as
the embodiment of the corporation (Dewey, 1926). This is particularly true in view of the cases
decided by the high court with the reasoning of Lord Reid adopted in Tesco Supermarkets Ltd. v
Nattras was followed. In this way, the directing mind and will of the company can be described
as a person working at a senior position in the company whose authority to perform as directed
and for the benefit of the company, has been derived of the board of directors of the company
(Gobert, 1994).
In order to identify the directing mind and will of a particular company, it is required that the
better person who has the management and control regarding the act in question, needs to be
identified.

Piercing the corporate veil
One of the major advantages associated with the formation of a corporate entity is the limited
liability of the shareholders. But there are certain circumstances where the law allows the courts
to disregard the corporate entity. Such situation is known as piercing the corporate veil. It is the
most frequently used method to hold the shareholders responsible for the acts of the corporation.
In this way, piercing the corporate veil is related with the situation where the courts are allowed
by the law to disregard the limited liability of the corporation and would be shareholders or the
directors of the corporation, personally liable for the actions or the debts of the company.
Piercing the veil is most commonly used in those operations (Dewey, 1926). However it needs to
be noted that generally a strong presumption is present among the courts against the piercing of
the corporate veil. Therefore the courts become very dubious the real only in cases involving
serious misconduct, for example, where there is the use of corporate form (Hansmann, Kraakman
and Squire, 2006).
Piercing the corporate veil is also known as lifting the corporate veil. It is a decision made by the
courts to consider the rights or the duties of a company as the rights and liabilities imposed on
the shareholders or the directors of the company. Generally a company is considered as a
separate legal entity, and is solely responsible regarding its debts and liabilities. But in
exceptional circumstances, the courts may decide to ignore the principle of separate identity of
corporations and pierce the corporate veil.

References
Gobert, J. (1994) Corporate Criminality: Four Models of Fault, 14 Legal Studies 393
Hansmann, H Kraakman R and Squire, R., (2006) 'Law and the Rise of the Firm', 119 Harvard
Law Review 1333
Lederman, E. (2000) Models for imposing corporate criminal liability: from adaptation and
imitation toward aggregation and the search for self-identity, 4 Buffalo Criminal Law Review
641
J Dewey, (1926) 'The Historic Background of Corporate Legal Personality' 35 Yale Law Journal
655