Law of Business Organizations: Directing Mind, Corporate Veil Analysis

This assignment delves into two critical legal concepts in business organizations: 'Directing Mind and Will' and 'Piercing the Corporate Veil.' The 'Directing Mind and Will' doctrine identifies the individuals within an organization whose actions and intentions are considered the organization's, particularly in cases of wrongdoing, referencing the case of Lennard’s Carrying Co. Ltd v Asiatic Petroleum Co Ltd. The assignment then explains 'Piercing the Corporate Veil,' a doctrine that disregards the separation between a corporation and its shareholders to hold individuals liable for corporate obligations, as seen in Gilford Motor Company Ltd v. Horne. The assignment provides clear explanations, supported by relevant case law and academic references, offering a comprehensive understanding of these important legal principles. Desklib offers this and other solved assignments to help students with their studies.

Law of Business organization

1. Research and explain the phrase “DIRECTING MIND and WILL" -
This doctrine refers to a living person who possesses mind and having the knowledge or motive
or being negligent in order to carry out his intentions which can be negative. An organization
does not possess any knowledge or motive as the functions of the organization is carried out by
living person. An organization cannot act on its own. Living persons are acting on behalf of the
company and basically acts as a company. If the living persons who are acting on behalf of the
company has a guilty mind than the guilt will be considered of the organization. Such living
persons can be board of directors, managing directors and other chief officers of the organization
who carry out various functions regarding management in the organization (Matheson, 2010).
The phrase of “DIRECTING MIND and WILL" can be answered by identification of those
living persons who was in actual control of operations and fulfilled their negative intentions.
The development of doctrine of “DIRECTING MIND and WILL" was started with the case of
Lennard’s Carrying Co. Ltd v Asiatic Petroleum Co Ltd. In this case, a question was raised by
House of Lords that can a corporate ship-owner be made guilty and liable for the loss of cargo
because of negligence in n navigation of one of ships. But, it was stated that servant or agent
liability has not to do anything for actual fault (Campbell and Armour, 2003). But the liability
extends to the company because of the reason that the action of living person on behalf of the
organization is considered as the action of the organization itself. Thus the concept of
“DIRECTING MIND and WILL" was applied.
2. Research and Explain the phrase "PIERCING THE CORPORATE VEIL’’-
The phrase piercing or lifting the corporate veil is the main doctrine of corporate in order to
make a decision whether the shareholders of the organization will be held liable for the

obligations of organization or not. When this doctrine is applied than the person who is hiding
behind the organization is held liable for all the obligations and commitment of the organization
and the concept of corporation is a separate entity has been ignored (Davies, 2010). The acts of
misfeasance and misdemeanor by the shareholders and directors will not bind the organization
with their acts. They are solely responsible for their act.
The concept of corporate entity was framed in order to encourage and promote business but not
to initiate fraud and carry out illegal activities. The corporate veil can be lifted at any time when
the corporate persons are opposed to justice or workman or against public interest. Gilford Motor
Company Ltd v. Horne is a case of "PIERCING THE CORPORATE VEIL’’ where Horne was
an ex employee of The Gilford motor company and in his contract terms it was mentioned that
he could not solicit customers on behalf of the organization. But he incorporated a limited
company in the name of his wife in order to deceive the customers (Kryvoi, 2010). The court
states that as the company was incorporated in order to deceive the customers and the corporate
veil has been lifted by the court. Corporate veil can be lifted because of fraud, benefit of revenue
and avoidance of public welfare and interests.

References:
Campbell, N. and Armour, J. (2003) Demystifying the Civil Liability of Corporate Agents. The
Cambridge Law Journal, 62(2), pp.290-303.
Davies, P.L. (2010) Introduction to company law. UK: Oxford University Press.
Kryvoi, Y. (2010) Piercing the Corporate Veil in International Arbitration. Global Bus. L.
Rev., 1, p.169.
Matheson, J.H. (2010) Why Courts Pierce: An Empirical Study of Piercing the Corporate
Veil. Berkeley Bus. LJ, 7, p.1.