Abstract

The principle of limited liability of a company has been uniformly adopted by developed countries. In order to ensure a fair balance, the courts agree on occasion to ‘pierce’ or ‘lift’ the corporate veil, which involves imposing liability on the mother company for actions of its subsidiary or individual shareholders, directors, and other involved persons for actions of the company. In this regard, there have been several studies arguing the legal issues associated with the limited liability of a company and piercing the corporate veil such as Schall (2016) and Michoud (2019). This paper compares current veil-piercing practices in three jurisdictions: the UK, the US, and Australia in order to outline the advantages and limitations of the approaches taken by the courts in each country as well as to identify best practices in terms of veil piercing. For that purpose, an analytical approach to the examination of the relevant legal rules, principles, and court cases has been adopted in undertaking the present paper. The paper comes up with a number of specific suggestions and recommendations for improving the regulatory role in regard to the subject of piercing of the corporate veil.

Highlights

  • The invention of the legal concept of the corporate veil was seen by many as one of the greatest achievements in the history of the economy The principle of limited liability of a company has been uniformly adopted by developed countries, with major multinational companies consisting of several subsidiaries in different states rising in power (Spotorno, 2018; Mujih, 2017)

  • Piercing the corporate veil continues to be a protective measure against the abuse of separate legal personality

  • This paper compared the reasoning of the judges in veil lifting cases in three jurisdictions: the UK, Australia, and the US

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Summary

INTRODUCTION

The invention of the legal concept of the corporate veil was seen by many as one of the greatest achievements in the history of the economy The principle of limited liability of a company has been uniformly adopted by developed countries, with major multinational companies consisting of several subsidiaries in different states rising in power (Spotorno, 2018; Mujih, 2017). The approaches to piercing the veil in both cases are not uniform across jurisdictions. Whether the veil should be lifted, including the instrumentality theory, the alter ego theory, and the recently formed business enterprise theory (Tsang, 2014). The approaches in those three jurisdictions will be compared in the current paper with the aim of extrapolating useful lessons and best practices for future decisions of the courts in each of them.

CASE BY CASE ASSESSMENT – LIFTING THE VEIL IN THE UK
STRICT THEORIES AND CONSISTENT APPROACHES – THE CASE OF THE US
LESSONS FOR THE FUTURE – BEST PRACTICES FROM THE THREE JURISDICTIONS
CONCLUSION
20. Environmental
31. Income
43. Occupational
BCLC 447

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