Piercing V. Lifting the Corporate Veil: Prest Decision in the Light of the Economic Analysis of the Company's Limited Liability

Abstract

The Supreme Court case Prest v Petrodel Resources Ltd [2013] 2 AC 415 addresses the issue of whether, and if so in what way, the court is competent to pierce the corporate veil save any specific statutory authority to do so. In this context, Lord Sumption sheds further light on the doctrine of abuse of corporate personality under English law. Foremost, he draws a distinction between the evasion and concealment situations. The first involves situation, in which the person sets up the company with the aim of avoiding the prior obligation incumbent upon him or her. The second occurs when the relevant identity of “real actors” is hidden behind the corporate veil. In the Lord Sumption’s opinion, only evasion may justify the application of the piercing the corporate veil doctrine. This article aims to find the rationale behind introduction of evasion and concealment principle, which seems to be the restriction of the piercing the corporate doctrine to the point where it will have no practical meaning for future cases.The Supreme Court case Prest v Petrodel Resources Ltd [2013] 2 AC 415 addresses the issue of whether, and if so in what way, the court is competent to pierce the corporate veil save any specific statutory authority to do so. In this context, Sumption LJ sheds further light on the doctrine of abuse of the company personality under English law. Foremost, he draws a blurred line between the concept of the piercing and lifting corporate veil. The intended strong limitation of the exception to the strict approach articulated in Salomon v A Salomon & Co Ltd [1897] A.C. 22 – separation of legal person from its shareholders and no prospects to make shareholder a party to the agreement concluded by the company – seems to be a failure yielding more doubts than providing a clearly articulated legal framework. This article argues against this approach and it suggests that the piercing veil doctrine needs to be forgotten once and for all.