Law 7143 Dissertation 20166012

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LIFTING THE CORPORATE VEIL- DECODING THE
SEPARATE LEGAL PERSONALITY DOCTRINE
6
Table of Contents
Introduction ...................................................................................................................................9
Definition of terms ......................................................................................................................9
Research question ...................................................................................................................10
Research objective ..................................................................................................................11
Significance of study ................................................................................................................11
Summary .................................................................................................................................12
Chapter 1: Ground of corporate veil ............................................................................................14
1.1 Background of the study ....................................................................................................14
1.2 Problem statement ............................................................................................................16
1.3 Company: A separate Legal entity .....................................................................................18
1.4 Issues before the courts and the need of lifting the veil ....................................................20
1.5 Instances when the corporate veil can be lifted .................................................................22
1.6 Exception to separated entity principles ............................................................................25
1.7 Lifting of Corporate Veil .....................................................................................................27
1.8 Piercing of Corporate Veil ..................................................................................................28
1.9 Grounds under which the veil is lifted ................................................................................29
1.10 Comparison of Statutory provisions in support of lifting veil ............................................32
1.11 Current judicial trends ......................................................................................................34
1.12 Chapter Summary ...........................................................................................................35
Chapter 2: Thematic analysis ......................................................................................................36
Theme 1: Separate legal personality doctrine is primarily the principle of English company law
36
Discussion of Theme 1 ............................................................................................................38
Theme 2: Similarities between US and UK’s statutory provisions support lifting ofcorporate
veil ...........................................................................................................................................38
Theme 3: Differences between corporate veil doctrine approach of US is liberal compared to
the UK ......................................................................................................................................40
Theme 4: Presence of reverse piercing has a disparity in UK and US ....................................43
Theme 5: Development trend of ‘doctrine of corporate veil approach’ in UK and US .............44
7
There is a significant difference between UK and US veil-piercing jurisprudence...................47
Summary .................................................................................................................................50
Conclusion ..................................................................................................................................50
Implication of the study ............................................................................................................50
Discussion ...............................................................................................................................51
Study Limitation .......................................................................................................................52
Recommendation ....................................................................................................................53
Conclusion ...............................................................................................................................54
Bibliography ................................................................................................................................54
8
Introduction
Definition of terms
Corporate Veil
From the name it can be suggested that a corporate veil is referred to as an iron curtain that
separates the company from the rest of its employees. It departs the actions of an organization
from the actions and positions of the shareholders by separating into limited liabilities and
marking the actions of their organization as shareholder’s liabilities as well as debts1. In other
words, the corporate veil can be defined as the legal concept which helps separate the various
actions of the company from those of the shareholders2. The function of the intangible curtain is
to make the concept clear and concrete that the employees and the company are not the same.
Concept of Lifting of Corporate Veil
The main concept behind the lifting of the corporate veil traces its concept back to the year 1844
with the start of the incorporation of the registration of the company3. It can be considered as a
sequential jurisprudence that developed over the years with the advent of a principle of the
limited liability of the company that was developed in the year 18554. This concept of the
incorporation of the limited liability and the company was further pinned down by the case of
1Alderson, Owen. Abandoning Corporate Ontology: Original Economic Principles and the Constitutional
Corporation. U. Pa. J. Const. L. 22 (2019): 561.
2McElhinney, Thomas J. A Bankruptcy Litigation Framework for Series LLC Eligibility, Property of the Estate and
Substantive Consolidation. Emory Bankr. Dev. J. 35 (2019): 151.
3Cheng-Han, Tan, Jiangyu Wang, and Christian Hofmann. Piercing the Corporate Veil: Historical, Theoretical and
Comparative Perspectives. Berkeley Bus. LJ 16 (2019): 140.
4Bismuth, Régis. Deciphering and Revisiting the (Guiding) Principles on Business and Human Rights. General
Principles and the Coherence of International Law. Brill Nijhoff, 2019. 309-327
9
Lee v. Lee Air Farming Ltd [1960] UKPC 33 which led to the formation of the doctrine for the
lifting of the veil5,6.
Meaning of Lifting the Corporate Veil
The meaning of lifting the corporate veil is piercing the veil so that the members of the company
in front of the veil can see the ones who are in the management of the company. This in other
words would mean that the members of the company would be treated as a single entity7.
Furthermore, the distinction of treating the company as a separate one would relive the company
of the veil. Moving the veil means that the stakeholders are directly liable for the debt and loss of
the company despite and it also helps in understanding the real culprit of behind the fraudulency.
Research question
The research would help in understanding the importance of lifting the corporate veil. Some
research questions have been formulated in this research that would help the researcher in
understanding the importance of the research. Moreover, the research questions would help in
making the research specific and the researcher will be able to complete the research
successfully. The research questions are as follows:
● What are issues before the courts in the UK and the USA that would lead the companies
to lift the corporate veil?
● What are the instances that have led to lifting the corporate veil of the company and
decoding a separate legal personality doctrine?
5Lee vs Lee Air Farming Limited [1960] UKPC 33)\.<https://lawlex.org/lex-pedia/lifting-of-corporate-veil-

under-the-companies-act-2013/26061>Accessed on 02-08-2021
6Aladashvili, Giorgi. The Essence of Corporation and Corporate Personality through Ontological Perspective. J.
Law (2020): 55.
7Banoo,Shaheen. Lifting of the Corporate Veil: Decoding the Doctrine of Separate Legal Personality. Available at
SSRN 3609245 (2018).
10
● What are the provisions that would lead to lifting of the corporate veil of the company
and would help in decoding a separate legal personality doctrine?
● In what ways would the piercing of the corporate veil lead to helping the companies in
decoding a separate legal personality doctrine?
Research objective
The research objective is based on the research questions. The objectives would help the
researcher in being specific to the research objectives. From the research objectives it can be
stated that the researcher will be able to understand the research in a better way. The research
objectives would help the researcher in specifying the various areas of focus. The research
objectives that have been formulated as follows:
● To understand the ways in which the issues before the courts in the UK and the USA that
would lead the companies to lift the corporate veil.
● To understand and analyze the ways various instances have led to lifting the corporate
veil of the company and decoding a separate legal personality doctrine.
● To understand the relationship between the provisions that would lead to lifting of the
corporate veil of the company and decoding a separate legal personality doctrine.
● To understand and analyze the ways in which the piercing of the corporate veil leads to
helping the companies in decoding a separate legal personality doctrine.
Significance of study
The research has helped in identifying the reason for the importance of lifting the corporate veil
of the company. This would also help the company in decoding the separate legal personality
doctrine which would further help in knowing the real faces behind the company’s management.
Furthermore, it can be stated that the doctrine of lifting the corporate veil would help in acting as
a complete check on any person who would attempt to do any wrongdoings which is legally
11
prohibited8. It can be stated that the paper attempts to understand the ways in which the doctrine
challenges the methods that would lead to the lifting of the corporate veil.
Furthermore, the paper is very significant to the future researchers to understand the various
methods that would help them in understanding the need to lift the veil. Moreover, it can be
stated that the research has been very helpful in understanding the effects of lifting the veil9.
Additionally, it can be stated that the research questions and the objectives that have been
defined in the research have helped in making the research specific and defining the facts. This
would help the researcher as well as the future researchers to find out the usefulness of the
research10. For the ease of the researcher, it has been observed that the research has been divided
into various parts that would help in bringing out the best in the research11. Hence, it can be
stated that the research has been quite significant that would help in establishing the facts that
would help in the understanding of the facts established in the research.
Summary
This chapter of the research has been very significant in establishing the facts that would help in
introducing the title in a proper manner. A short background study has been provided and a
problem statement has been formulated. A brief definition of the terms has also been provided in
this chapter. Some research questions and objectives have been formulated here that would make
the research a complete one. Along with these, the significance of the research has also been
identified which would help in making the research a concrete one. Moreover, the research has
8Bussel, Daniel J. Corporate Governance, Bankruptcy Waivers, and Consolidation in Bankruptcy. Emory Bankr.
Dev. J. 36 (2020): 99.
9Chesterman, Simon. Artificial intelligence and the limits of legal personality. International & Comparative Law
Quarterly 69.4 (2020): 819-844.
10Corredor,Sandra, and Joseph T. Mahoney. Multi-business firms’ corporate renewal decisions: Divestiture
governance mode choice of corporate spin-offs and equity carve-outs. Strategic Management Review (2021).
11Kothari, Vinod, and Sikha Bansal. Entity Versus Enterprise: Dealing with Insolvency of Corporate
Groups. Available at SSRN 3350877 (2019).
12
been very helpful in making the research an authentic one and has helped in establishing a
concrete pavement for the rest of the chapters of the research.
13
Chapter 1: Ground of corporate veil
1.1 Background of the study
'Corporate veil laws' are different from one nation to another, and in this part, profound
explanations are presented based on the UK and USA by highlighting its comparison. In the
United Kingdom, corporate veil law has a metaphorical reference. This reference suggests that
corporate veil law has general principles on the rights and duties of a corporation while all the
responsibilities come under the company's control. A natural person cannot be legally
accountable for the obligations unless he has guaranteed 12,13. Like this scenario, an employee
cannot be responsible or bound by the duties and rights of a particular company and in order to
promote transparency in legal activities, the court of the United Kingdom has ordered to lift this
veil 14,15. This court treats the company to become liable for its debt. Long ago, English law
recognised the legal personality of organisations in the UK high court16. A company has a
separate legal personality and is accountable for any obligations while employees rest on its
behalf 17. Different legal personnel have limited responsibilities of 'Ltd' and 'plc' as per English
regulations.
The central objectivity of lifting the corporate veil in the USA is almost the same as UK
regulations though few differences exist. Laws regarding piercing the corporate veil are different
from state to state in the USA. In Florida, corporate companies are bound to provide relevant
12Macey, Joshua C. What corporate veil?'We the Corporations'. Michigan Law Review 117.6 (2019): 1195-1214.
13VALIDITY OF GUARANTEES FOR DEBTS OF MINORS https://onlinelibrary.wiley.com/doi/pdf/10.1111/

j.1468-2230.1947.tb00036.x
14Kusuma, Ng Catharina Enggar, and Fl YudhiPriyoAmboro. Doing the Corporate Business with Piercing the
Corporate Veil Doctrine: Indonesia, Us AndUk Perspective. Sociological Jurisprudence Journal 3.2 (2020): 126-129.
[Adams]
15Hardee, Catherine A. Veil Piercing and the Untapped Power of State Courts. Wash. L. Rev. 94 (2019): 217.
16Solaiman, Sheikh M. Legal personality of robots, corporations, idols and chimpanzees: a quest for
legitimacy. Artificial intelligence and law 25.2 (2017): 155-179.
17EllisL. Separate Legal entities (advantages and Benefits) in business (2021). Available at: https://hallellis.co.uk/
separate-legal-entities-meaning/
14
things in order to lift the corporate veil 18. In Florida, two main things are considered as
appropriate. Firstly, a concerned company is required to alter ego instrumental with its parent
organisation and shareholders. Secondly, alligator shareholders or the parent organisation is also
needful to perform improper conduct. However, this regulation is different in Alaska, which
includes disjunctive and conjunctive tests while piercing the corporate veil 19. Disjunctive tests
require either excessive control or misuse of responsibilities, while conjunctive incorporates both
of these. However, the central court considered 'actual fraud' when several things took place 20,21.
These include failure of a party to disclose facts and when a party suffered severe injuries as a
result of undisclosed fact. 22
The strictness of law regarding the lifting of corporate veil increases with the local or regional
level while piercing of this law can occur based on some everyday events worldwide 23. These
are soundproof of the existence of fraud, injustice or wrongdoing towards third parties, failure to
maintain and keep separate legal personally doctrine, failure to maintain separate identities of
employees or shareholders24. 1976 case of DHN Food Distributors v Tower Hamletsis where the
18Burkett, Maxine. Behind the veil: Climate migration, regime shift, and a new theory of justice. Harv. CR-CLL
Rev. 53 (2018): 445.
19Herring,
Tanya. The 3P-index (prevention, Protection,'or'Prosecution), a Revised Approach to Forced Labour,
Compliance and Enforcement: A Systematic Review: A Socio-legal Singe, Critical Case Study of the Cote D'Ivoire
Cocoa Bean Industry and Nestle. Diss. Prifysgol Bangor University, 2017.
20Zavalko,Tetiana. The Corporate Veil in the Case Law of the European Court of Human Rights. Diss. Mykolo
Romerio universitetas, 2020.
21 Definition and Examples of Fraud Available at: https://www.thoughtco.com/fraud-definition-and-

examples-4175237 [Accessed on: 23-09-2021]
22 Mujih, Edwin Piercing the corporate veil: where is the reverse gear?. Law Quarterly Review 133 (2017): 322-337.
Cheng-Han, Tan, Jiangyu Wang, and Christian Hofmann Piercing the Corporate Veil: Historical, Theoretical and
Comparative Perspectives. Berkeley Bus. LJ 16 (2019)
Chi.-Kent J. Int'l & Comp. L. 17.Piercing the Corporate Veil: US Lessons for Romania & Slovakia. Chi.-Kent J. Int'l
& Comp. L. 17 (2017)
23\ Horvathova, Alexandra, and Caitlin Gabriel Stanescu Piercing the Corporate Veil: US Lessons for Romania &
Slovakia. Chi.-Kent J. Int'l & Comp. L. 17 (2017):
24Walklate, Sandra, Kate Fitz-Gibbon, and Jude McCulloch. Is more law the answer? Seeking justice for victims of
intimate partner violence through the reform of legal categories. Criminology & Criminal Justice 18.1
(2018): 115-131.
15
veil was lifted to benefit the parent company in a group situation and DHN was treated as the
land was owned by the corporate Tower Hamlets.Besides, crucial instances like failure to
maintain adequate formalities of corporate companies and adequate capitalisation of global
companies. In recent days, many entrepreneurs started their business practices and facilities
commercial ventures to shield themselves from personal liabilities. In addition, the law of
corporate veil is not as strict for these companies, and it becomes more complex with public and
large global companies 2526. While introducing piercing of the corporate veil, it becomes hectic
as it requires more paperwork, administrative formalities, loss of privacy and denial of several
fundamental rights of a company. Hence, things become quite expensive as a double taxation
system often takes place. Double taxation is the situation in which the company’s income tax is
taxed twice and it is due to the company’s income is chargeable under the corporate tax for the
first time. The second time is due to the income distribution among the stakeholders that is added
to their personal income at the end. Corporations which have both salary and wage structures
often lead to double taxation issues while conducting piercing of the corporate veil 27.
1.2 Problem statement
Separated legal personality doctrine is the act as one of the effective factors for the growth and
development of any organization. In this respect, there are a lot of issues regarding this
individual entity of the organization and its owner. It has been found that under the legal veil, the
owner might proceed with illegal and improper acts so that they could get benefited under the
iron veil of the separate existence of the company in Miller vs Solomons 100 Cal.App. 756 case
by the House of Lords. It has been found that this curtain might be helpful for the organizational
25 Behind the Veil: Climate Migration, Regime Shift, and a New Theory of Justice Available at: https://
harvardcrcl.org/wp-content/uploads/sites/10/2018/11/Burkett.pdf [Accessed on: 23-09-2021]
26Kabour, Reem. Revisiting the Inhibited Doctrine of Piercing the Corporate Veil in English Company Law. King's
Student L. Rev. 9 (2018): 58.
27Corredor,Sandra, and Joseph T. Mahoney. Multi-business firms’ corporate renewal decisions: Divestiture
governance mode choice of corporate spin-offs and equity carve-outs. Strategic Management Review (2021).
16
aspect but unveiling it is necessary for protesting against corruption 28. It is true that the owner
could lend and borrow money under the company from any bank and disappeared with the name
of the individual entity of the organization. Thus, it could be stated that under the veil the owner
could misuse the opportunity of the separate existence of the organization and its owners. In the
case of Gilford Motor Co Ltd v Horne [1933] Ch 935 29the fraud activities are noticed and that
is one of the major aspects of the unveiling of corporate separate existence. It is true that Mr
Horne was the ex-employee of Gilford Motor Company Ltd and after his termination, he stated
new company and proceeded to solicit old consumers from his previous company 30.
Another major factor is that the court of justice could proceed with release the owner in case of
individual existence of company for not paying interest of insurance, as well as borrowed
moneyon the case of The Conception that the Corporation is a Nexus of Contracts, and the Dual
Nature of the Firm, 24 DEL. J. CORP. L. 819, 822 (1999)3132. It is true that this judgment often
went against the banks or insurance company and they faced huge losses due to this legal curtain
of separate existence22. The information could be manipulative and effective for the better
development of insurance companies or banks. In fact, these fraud activities are the actual reason
why the unveiling of separate existence is needed to proceed. Any cases that are handled by
government and court of justice it is often noticed that injustice against the banks or insurance
companies and compelled those companies to face huge losses 33.
28Nugroho, Sandi, Ningrum Natasya Sirait, and Bismar Nasution. Implementation of shareholder’s alter ego and its
accountability according to piercing the corporate veil doctrine. PalArch's Journal of Archaeology of Egypt/
Egyptology 17.7 (2020): 2515-2526.
29Gilford Motor Co Ltd v Horne [1933] Ch 935
30How to side-step valid trust and corporate structures. (2018) < https://academic.oup.com/tandt/article-abstract/
20/9/891/1655648> accessed 2 August 2021
31Lvov,Ariella M. Preserving Limited Liability: Mitigating the Inequities of Reverse Veil Piercing with A
Comprehensive Framework. UC Davis Bus. LJ 18 (2017): 161.
32Morrissey, Joseph F. A contractarian defense of corporate regulation. Transactions: Tenn. J. Bus. L. 11 (2009):
135.
33Dine, Janet. The three shades of tax avoidance of corporate groups: company law, ethics and the multiplicity of
jurisdictions involved. European Business Law Review 30.1 (2019).
17
Improper evaluation of the company and owners’ intention to lend money or borrowing sums and
them collapsing is necessary to proceed with better performance of organizational growth. Hence
it is true that in the case of groups enterprises there need to proceed with the proper unveiling of
the curtain so that there could be effective judgement for the sake of owner’s opportunity. It
could be stated that this organization need to proceed with proper evaluation of that factor that
could effectively draw the intention of people so that it could be drawn through it. Moreover, it
could be stated that improper evaluation of the opportunity is one of the major aspects for the
group enterprises to become successful in fraud activities for the separate existence of
organization and owners. Organizations often borrowed sums of amounts and declared
themselves bankrupt and that could be effective for the unveiling of the existence of
organizations and owners. Henceforth, organizations can borrow little amount to fulfil the
present requirements and using existing investments for repaying their debts.
1.3 Company: A separate Legal entity
The company often acts as a separate legal entity in case of veiling itself under an invisible veil
so that it could get separated from its liabilities and that could not depend on the owner of the
organization. In this respect, the company could be considered as an individual legal entity with
an independent existence from its members34. In the case of the Salomon v A Salomon and Co
Ltd [1897] AC 22 35case, Mr. Salomon proceeded to sell his manufacturing business to Salomon
& Co. Ltd which was incorporated by him36. This organization consisted of 6 shareholders who
were his wife and 5 children. It has been found that this organization received debentures of 10
thousand pounds and was divided upon its shareholders. In this case it was seen that the other
insecure creditors had brought the case against the former. It was then observed that the House of
34Separate legal entity under Syariah law and its application on Islamic banking in Malaysia: A note. (2020)<http://
e-journal.uum.edu.my/index.php/ijbf/article/view/8394> accessed 2 August 2-021
35Salomon v A Salomon and Co Ltd [1897] AC 22
36Salomon v A Salomon and Co Ltd [1897]Piercing the corporate veil doctrine under English company law after
Prest v Petrodel decision (2017) <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2962934> accessed 2 August
2-021
18
Lords stated that the time of establishment of the company has led to the increasing independent
entity in the society. Furthermore, it has been observed that the company has formed a certificate
of incorporation that gives rise to an independent and a separate entity. This is mainly because
there were no sham since the law created a facility during the certificate of incorporation when a
legal existence was observed. The business collapsed and a claim was made by Salomon as a
secured creditor of debentures held. It was argued by the liquidator that Salomon must not be
ranked ahead of other creditors as Mr. Salomon and the company was the same people and the
organization proceeded to carry the business on behalf of himself. In this respect the House of
Lords clearly stated that the creditor of the company is not equal to the debt of Mr Salomon as
the organization act as a separate entity, as well as it must be treated like any other independent
person with its rights and liabilities appropriate to itselfat the case of Salomon v. Salomon & Co
Ltd [1897] AC 2228.
Even in the case of Macaura v Northern Assurance Co Ltd [1925] AC 61937it has appeared at the
House of Lord is on the concern of lifting the corporate veil. It has been found that the insurer
could not blame Mr. Macaura for being the plaintiff of the insurance company. The House of
Lords stated that the company is the legal separate owner and not a plaintiff. In this respect the
interest of the insurer could not be paid by the owner itself rather it is the sole property of the
company38. In this respect, the insurer could not blame an organization for gathering interest in
insurance as it acts as a separate entity in the business market. It was observed in the mentioned
case the former held all the shares in the company except one. It was observed that he made all
the shares in his name. One day when the timber got destroyed the insurance company stated that
the timber belonged to the company. It held that the shareholder has 99.99% of the total shares as
a total outsider. This did not let the company to own the properties of the company. However, the
shareholder did not have a proper insurable interest as a property of the company.
37Macaura v Northern Assurance Co Ltd [1925] AC 619
38Reverse veil-piercing in Singapore and its consequences. (2018) <https://heinonline.org/hol-cgi-bin/

get_pdf.cgi?handle=hein.journals/saclj30&section=50>accessed 2 August 2-021
19
In the case of Lee v. Lee Air Farming Ltd. [1960] UKPC 3339the court stated that being an
individual entity, Lee’s wife could claim compensation in case of her husband’s death40. It is also
the major step towards unveiling the legal entity of the organization. In fact, being the owner of
the company, Lee is a separate entity and could act as one of the members of the organization
and could get facilities like other employees. In this case it was observed that the wife of Lee
demanded compensation due to the air accident. This was following the workmen's compensation
act on the ground 31. This was because her husband died during the flight41. The accused who
was held was Lee who was both the MD as well as the master. Thus, he had a double capacity as
an employee of the company as well as a pilot. The corporate personality lets an individual to be
the master as well as the servant of an organization at the same time. It is in these cases that the
corporate companies need the lifting of the corporate veil. In this case a proper corporate
personality façade is used. Moreover, it could be stated that these cases are the best example of
the act of a company and its owner in the case of a separate legal entity.
1.4 Issues before the courts and the need of lifting the veil
A company can be regarded as an artificial person or in other words it can be regarded as a

juristic person and can be considered as a fiction of law. In the contemplation of law, it exists as
having its own duties and the rights. As can be seen in the case of Gallagher v. Germania
Brewing Company, [1893] 53 MINN. 21442 fought in the USA, there was an appeal by the
plaintiff to the court that in the complaint there was no intervention whatsoever on grounds of
facts that needed relief in order for his action.43 The mentioned case was fought is the Minnesota
Supreme Court. The appeal was made by the plaintiff Matthew Gallagher in an order that was
39Lee v. Lee Air Farming Ltd. [1960] UKPC 33

40Personhood: A legal tool for furthering Māori aspirations for land.( 2017) <https://www.otago.ac.nz/law/
research/journals/otago672763.pdf>accessed 2 August 2-021
41Hardman, Thomas P. The Common-Law Right of Subrogation Under Workmen's Compensation Acts. Va. L. Reg.
ns 6 (1920): 254.
42Gallagher v. Germania Brewing Company, [1893] 53 MINN. 214
43Gallaghar v. Germania Brewing Company, [1893] 53 MINN. 214. Available at: <https://www.ravellaw.com/
opinions/8e46752d69a7d040c37f1821831d48ba> Accessed on 3 August, 2021.
20
made at the District Court of Hennepin County which was made in 6th April, 1982. The decision
passed by the court helped in identifying the issues in a proper manner and helps in
understanding the issues in a proper manner.
However, it can be stated that this also gave the court an opportunity to indulge in the various
improper and the illegal acts that were put up by the persons behind the veil to take advantage of
this and indulge in committing frauds.44 Hence, in order to punish those people who, abuse the
law a doctrine stating the lifting of the veil is much needed in the UK and the USA. Another case
of the UK that has been stated earlier is the Salomon v. Salomon & Co. Ltd. [1897] A.C. 22.45
shows that the company is at law, a totally different person. Thus, this affects the members of the
company to a great extent. Hence, there is an urgent need to remove the corporate veil. The case
was fought in the House of the lords. In this case court of appeal passed the decision based on the
cases. The mentioned authority appealed that the above ruling was reversed however, the
decision was held unanimously.
Thus, it can be stated that in order to punish the people who tend to be involved in the
wrongdoings and hide under the corporate veil this doctrine would help. The main idea behind
the piercing of the veil is a proper check on the principle that holds the company liable to the
shareholders.46 The main issues pertaining to the piercing of the veil are the uncertainty (such as
uncertainty in incorporation, availing limited liabilities or separate personalities) among the
commentators and the production of consultant (including the organization, shareholders or the
decisions of court) results. From the case of Walkovszky v. Carlton, 223 N.E.2d 6 (N.Y. 1966)47
that took place in New York, USA the court held that the plaintiff needs to prove that the
44Rathnayake,R. M. R. K. K. The Effectiveness of the Piercing of Corporate Veil Under Sri Lankan Law: A
Comparative Analysis of the Sri Lankan Law with UK Law. (2020).
46Simamora, Y. Sogar, SujayadiSujayadi, and YuniartiYuniarti. BINDING EFFECT OF ARBITRATION CLAUSE

TO THIRD PARTIES: PRIVITY OF CONTRACT DOCTRINE Vs. PIERCING THE CORPORATE
VEIL. Yuridika 33.1 (2018): 171-187
47Walkovszky v. Carlton, 223 N.E.2d 6 (N.Y. 1966)
21
shareholder has used the corporation as an agent to conduct a business in full individual
capacity48. The New York court has disregarded the corporate form in all the areas that are
necessary in order to prevent the frauds.
From the above case examples, it can be stated that in order to overcome these issues it is
necessary to pierce the veil. Hence, it can be stated that the lifting of the veil is highly necessary
in order to abolish all the unlawful practices that go in behind a veil.49 Thus, it can be stated that
these issues are highly necessary for the maintenance of a proper functioning of the companies.
The issues before the courts that led to the need of lifting the veil helps the company in taking
drastic steps to make the company and its members as a single entity.
1.5 Instances when the corporate veil can be lifted
There are many judicial interpretations that would help in understanding the circumstances that
would justify the lifting of the veil. Furthermore, it can be stated that the various instances of
lifting the corporate veil would help the wrongdoer get punished. This would also prevent the
people from hiding behind the fictitious corporate veil and getting saved. Some of the instances
in the UK and the USA has been produced as follows:
Protection of the Revenue
Under this topic it has been observed that the liabilities that is imposed by the individuals who
are behind the company and are engaged in illegal activities are resorted. The case of DHN Food
Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 85250in the UK has
led to the development of a group of companies that would help in treating the company as a
48Lenz Jr, Frederick S., and Andrew J. Newman. Corporations—Stockholders' Personal Liability—Application of
Agency or Under-capitalization Theory to Pierce Corporate Veil.—Walkovszky v. Carlton. Boston College Law
Review 8.4 (1967): 981.
49McGowan, Jamie. Veil Piercing in the UK: An Evolution of Doctrinal Approaches. De Lege Ferenda 2 (2019): 92.
50DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852
22
single entity.51 In the mentioned case it was seen that the company compensated for the loss in a
better manner. The DHN company used to import groceries and had a cash and carry facility. The
Court of Appeal held that DHN and Bronze are an important part of a single entity. Furthermore,
it can be stated that the judgement of Lord Dennings MR was that since the land was owned by a
subsidiary company at the time of acquisition there were two heads. Hence a compensation was
required to be made by the company under the Land compensation Act, 1961. Furthermore, it
can be stated that the protection of the revenue is a matter of higher concern in the introduction
of the doctrine. Furthermore, another case of the US Milestone Shipping, SA v. Estech Trading
LLC, 764 F Supp 2d 632, 2011 A.M.C. 968 (S.D.N.Y. 2011) helps in understanding the protection
of the revenue to a great extent. 52 This case was fought in the US District Court for the Southern
District of New York. The case was then fought by the Foxley Square Office under the presiding
judge Richard J. Sullivan. The plaintiff in this case was observed to be Milestone Shipping S.A.
who was represented by Claurisse Ann Campanale- Orozco.
The case was in the middle of a maritime dispute along with plaintiff Milestone Shipping S.A. to
their defendants named Estech Trading, LLC including American energy services Inc. who was
under the order from the court. Court favored their decision (in favor of Maritime, held on 3rd
January, 2011) in granting the ex parte motion for their issuance against the attachment along
with garnishments regarding certain funds (called as ‘attached funds’) professed in an escrow
account that was controlled by the garnishee Mahoney and Keane, LLP. On the other hand, on
11th January, 2011, AES opposed and requested to perform pre-motion conference interlinked to
the propsed motion as well as vacating the attachment orders. However, AES also sought and
urged for the further orders to be inclusive about declaring the ownership or right of immediate
possession to the attached funds. This was also claimed by not being to the subject of arbitration
that was following their escrow agreement in the middle of Milestone and AES co-defendants
whereas another claim was to achieve permission for directing Mahoney for initiating an
51Demonte, JessicaThe Impact of United States v. Bestfoods on Parent Liability Under CERCLA: When a Door is
Closed, Look for an Open Window. Ohio St. LJ 61 (2000): 443.
52Metjahic, LailaDeconstructing the DAO: the need for legal recognition and the application of securities laws to
decentralized organizations. Cardozo L. Rev. 39 (2017): 1533.
23
immediate return against the attached funds to AES. The decisions and initiations by the court
were further challenged by Maritime while indicating cross-moves against releasing funds and
by telephonic hearing for Vacatur motion was also held. Further followed by several arguments
the above-mentioned circumstances were taken into consideration by the court for approving
further decisions. The court considers AES’s Vacatur Motion to be submitted and grounded on
the submissions. The hearing and past judgements were taken into considerations and the court
denied the Vacatur Motion. Furthermore, the court found the remaining proposed motions to be
premature and hence denies to take into considerations 53.
Prevention of fraud
The prevention of fraud for improper conduct is necessary for the piercing of the veil.
Furthermore, it can be stated that piercing the veil is quite necessary in order to stop these
practices. In the case of Gilford Motor Co Ltd v Horne [1933] Ch 935it was seen that Horne has
incorporated a company in which the name of his wife needs to be solicited in business from
Gilford Motors that would have a contract under which he was restricted to have a similar
business.54 The court held that even though his wife was the shareholder of the company, Horne
has no shares whatsoever in the company. It was seen that the wife’s name was not there in the
business and hence it was prohibited for the company to do business. Hence, it was seen that
lifting the veil became much necessary in this case. This case was fought in the English Court of
Appeal which was held by the company and was set up to prevent the various contractual
obligations. Furthermore, it was observed that the decision of the court helped in piercing the
corporate veil and establishing its importance.
In another case of Jones v Lipman [1962] 1 WLR 83255it was seen that the court allowed lifting
of the corporate veil which was quite necessary for the members to see who was behind the veil.
53Leagle.com. MILESTONE SHIPPING, S.A. v. ESTECH TRADING LLC. (2019) Available at: https://
www.leagle.com/decision/inadvfdco110823000053
54Gilford Motor Co Ltd v Horne [1933] Ch 935Balharova, M. Piercing Corporate Veil in U.S. and UK: Are we
witnessing the downfall of the doctrine? [2016] 1(1) HHS ILSA Law Journal.
55Jones v Lipman [1962] 1 WLR 832
24
This helped the company in being treated as a single entity altogether.56 This case was also
fought in the English Court of Appeal a specific performance was ordered against both the
parties.
Determining the enemy character
As a company is considered to be an artificial person for this case there is every reason that it
cannot be regarded as a friend or an enemy. In the case of Daimler Co Ltd v Continental Tyre and
Rubber Co (Great Britain) Ltd [1916] 2 AC 307 it was seen that the Daimler was a company
which was incorporated in the UK whereas the directors of the company were German
nationals.57 The court held that it is important for the company to determine the character of the
company to lift the corporate veil. When it was found that the directors of the company were
German after lifting the veil, Continental Tyre Co.was open to contract. The mentioned case was
fought in the English Court of Appeal but the court was mainly focused on processes of
supplying the tyres. The main issue that has been identified in this case was whether the
corporators of the company are capable of acquiring the relevant character.
1.6 Exception to separated entity principles
From the early instances of the Salomon judgements that were passed by the court it was seen
that the possible exceptions are needed to separate the entity concept. It was seen that Lord
Halsbury had recognized that there was a separate entity which provided that there was no fraud
and no agency and if the company was a real one and not a fiction or myth.58 Similarly, it was
seen in the case of Littlewoods Mail Order Stores v Inland Revenue Commissioners [1969]
1WLR 124159 Lord Denning has recorded a judgement which stated that there was no
56McGowan, Jamie. Veil Piercing in the UK: An Evolution of Doctrinal Approaches. De Lege Ferenda 2 (2019): 92.
57Metjahic, Laila. Deconstructing the DAO: the need for legal recognition and the application of securities laws to
decentralized organizations. Cardozo L. Rev. 39 (2017): 1533.
58LittlewoodsMail Order Stores v Inland Revenue Commissioners [1969] Mishra, Itishree, and Sidhartha Das. A
DESCRIPTIVE STUDY OF DOCTRINES UNDER LAW OF CONTRACT. PalArch's Journal of Archaeology of
Egypt/Egyptology 17.6 (2020): 4978-4983.
59Littlewoods Mail Order Stores v Inland Revenue Commissioners [1969] 1 WLR 1241
25
incorporation which was fully ready.60 The judgement passed was cast a veil over the personality
of a limited company through which the courts cannot see. The courts can, and often do, pull off
the mask. They look to see what really lies behind 6162.
Similarly, there was a case in the United States which was in its early decision phase. In the case
of United States v. Milwaukee Refrigerator Transit Co., 145 F. 1007 (1906) it was seen that the
Circuit Court (ED Wisconsin) decided the following:
A corporation will be looked upon as a legal entity as a general rule but when the notion of legal
entity is used to defeat public convenience, justify wrong, protect fraud or defend crime the law
will regard the corporation as an association of persons.63
It was seen that two reasons which are required for the exceptions in order to separate the entity
of the principle exists, according to Doctrine of Separate Legal Entity, the first reason that can be
considered is that the corporation which is being considered is seen to be a legal person and
cannot always be treated as an independent. For instance, if a corporation is quite capable to
commit a tort or in any case reporting a crime which requires a proof of men’s rea unless the
courts have disregarded the separate entity64.
Secondly, it was seen that a strict recognition of the principle might lead to a misleading outcome
in case the interested parties have the ability to hide behind the veil of the company65.
60Hossain, Md Sazzad. An analysis of the supply chain principle for the UK’s overseas companies: The practice of
tort law under international corporate law. International Journal of Law and Management (2018).
61Littlewoods Mail Order Stores v Inland Revenue Commissioners [1969] 1 WLR 1241
62The Doctrine of Lifting Veil Available at: https://thecompany.ninja/lifting-corporate-veil/ [Accessed on:

23-09-2021]
63United States v. Milwaukee Refrigerator Transit Co., 145 F. 1007 (1906)Balharova, M. Piercing Corporate Veil in
U.S. and UK: Are we witnessing the downfall of the doctrine? [2016] 1(1) HHS ILSA Law Journal.
64Dewi, Sandra. Prinsip Piercing The Corporate Veil Dalam Perseroan Terbatas Dihubungkan Dengan Good
Corporate Governance. Jurnal Hukum Respublica 16.2 (2017): 252-266.
65 h t t p : / / d s p a c e . j g u . e d u . i n : 8 0 8 0 / j s p u i / b i t s t r e a m / 1 0 7 3 9 / 4 5 / 1 / H a r s h i t % 2 0 S a x e n a % 2 0 -
%20Lifting%20the%20Corporate%20Veil.pdf
26
Furthermore, it has been seen that an analysis has suggested that these two exceptions have led to
the formation of a single judicial discretion which gave a proper legislative action. 66 This helps
the companies to grow as a separate entity and be disregarded in the area where injustice is
generally intended. These exceptions have helped the company in forming the separate entity
principles that would help the company to lift the corporate veil altogether.
1.7 Lifting of Corporate Veil
The decisions taken from the designing can impact external validity of the research outcomes if
these concerned factors are not been analyzed properly. As the reliability and validity depends on
the exclusion factors, in this study random error, confounding and bias are trying to minimize.
The opinions of shareholders that are trying to maintain the corporate veil with the understanding
its positive effects, are included while the opinions of shareholders reflected the improper use of
this corporate veil and thus create illogical issues between shareholders and companies are not
included in this study. Various journals and articles have been consulted while doing the research
which has led to the provided strong examples and the evidence while doing the research.
This chapter has discussed several aspects of 'corporate veil regulation' with the light of the UK
and US. For scientific data analysis, information is collected from relevant academic journals
with plenty of recent incidents. These case studies are supported by various law discussions.
'Corporate veil law' is quite strict and structured in the UK though it is younger than the US. US
courts offer a significant liberal mentality in 'corporate veil piercing' whereas UK courts have a
conservative approach to this law. However, development of this law has gone through three
main stages in the UK, whereas US courts face a lack of harmony in its implementation.
Countless states and diverse sources of jurisdiction have made 'corporate veil piercing law'
complicated in the US while the UK follows regulation of the Supreme Court. Both of these
countries emphasize this law during international cases, and it is needful to implement for
promoting equality, justice and crime prevention behind this ironic and invisible curtain.
66Hossain, Md Sazzad. An analysis of the supply chain principle for the UK’s overseas companies: The practice of
tort law under international corporate law. International Journal of Law and Management (2018).
27
1.8 Piercing of Corporate Veil
Corporate veil is an invisible iron curtain that separates different personalities of a corporation
from the diverse personalities of its shareholders. Through the corporate veil, shareholders are
protected from personal liabilities from organisation's extended debt or other obligations.
'Piercing of corporate veil' is also considered as 'lifting of veil' takes place when a separate legal
entity or organisation is ignored intentionally. Therefore, this ideology disregards the separate
identity of a company and an individual tries to look behind the true owners or true members
who are in responsible designation of this specific company. However, lifting or piercing of a
corporate veil provides a company a frictional legal identity that is capable of being sued in its
capacity. In this case there is still a veil of incorporation that exists between the company and its
people. Once the case of Lee v Lee’s Air Farming Ltd [1960] UKPC 33 had taken place
separated personality principles were considered. Later a few changes in law were granted by the
Court that, company is capable of owning its property, but any case of discrepancy, the company
itself will be addressed, Companies Act, 195667. The mentioned case has been held in the
Judicial Committee of The Privy Council under the judges sitting. The judges siting was held
under Viscount Simonds, Lord Tucker, Lord Reid, Lord Morris of Borth-Y-Gestiand Lord
Denning.
Another extension has taken place in the law of corporate veil lifting by the concerned court. It
states that increased debt of a company can only be recoverable by the company itself and not
from any of its shareholders68. The case has been the same as before and the cases have stated
that the corporate veil is needed to be lifted. Laws are ever-changing and extends as per various
latest cases. Therefore, a significant question has arisen on the need of 'corporate veil law' or its
existence. Besides, different issues take place before court cases and the need of lifting the veil.
For example, an artificial or juristic person behind this corporate veil can have several illegal
67Bukar,Bagoni A. Expanding the Scope of Business Activities under the Companies and Allied Matters Act: One-
Person Companies and Partnerships in Focus. Journal of Commercial and Property Law 8.1 (2021).
68Bukar,Bagoni A. Expanding the Scope of Business Activities under the Companies and Allied Matters Act: One-
Person Companies and Partnerships in Focus. Journal of Commercial and Property Law 8.1 (2021).
28
activities which are important to judge in favour of both company and other shareholder
personalities. Lifting/ perching corporate veils thus provide an opportunity to indulge in illegal
activities to fulfil their own wrong aspirations. For many times, this veil creates a shade to
improper activities of juristic persons with full freedom and without fear of being caught.
Therefore, reducing corruption and committing fraud attempts needs piercing of the corporate
veil for higher visibility. 69 In the case of New Zealand Shipping Co Ltd v Satterthwaite (AM)&
Co Ltd (The Eurymedon) [1975] AC 154 (PC)70it was seen that the main issue in the case was
whether there were benefits of time limit in the clause. It was seen that the Privy council held
that the latter could easily rely on the clause.
Abusing legal regulation of companies deserve proper punishments to formulate strict

convenience of doctrine with honesty. Wrongdoers hide themselves behind an iron curtain and
misuse their purpose of doctrine. Thus, lifting of such curtains or laws is extremely required and
logical to take decisions regarding equality and fairness.
1.9 Grounds under which the veil is lifted
The corporate veil is lifted on the grounds in which the company decides to ignore the managing
boards of the company and the members of the company as a separate entity. This matter is a
huge discretion of the various courts and would depend upon the various underlying factors.
Some of the grounds under which the veil is lifted are as follows:
Frauds
69Solaiman, Sheikh M. Legal personality of robots, corporations, idols and chimpanzees: a quest for
legitimacy. Artificial intelligence and law 25.2 (2017)
Spotorno, Agustin Ricardo. Piercing the corporate veil in the UK: The never-ending mess. Business Law
Review 39.4 (2018).
Vastardis, Anil Yilmaz, and Rachel Chambers. Overcoming the Corporate Veil Challenge: Could Investment Law
Inspire the Proposed Business and Human Rights Treaty?. International & Comparative Law Quarterly 67.2 (2018)
70New Zealand Shipping Co Ltd v Satterthwaite (AM) & Co Ltd (The Eurymedon) [1975] AC 154 (PC)
29
The courts are more interested in piercing the corporate veil when the court feels that there is a
fraudulent matter involved. In the case of Hilton v Plustitle [1989] 1 WLR 149 it was observed
that the plaintiff as well as the defendant together agreed to use the name of the company in the
agreement of a tenancy.71 The issue of Adams v Cape Industries plc [1990] Ch 43372 has shown
that there were motives of the perpetrator which was considered to be a case of exemption of the
fraud. The motives were declared by Mr. Morison urging the court to take initiatives by lifting
the corporate veil factors including factors like (i) limitations to be imposing on him through
conducts by law; (ii) promoting rights of reliefs against him already as possessed by other third
parties as well as (iii) lastly, was to continue the rights of relief in future aspects 73.
Group enterprises
In some cases, it has been seen that the various groups of enterprises have been adhered to and
the court has encouraged in lifting the corporate veil so as to provide a better look at the various
economic realities. In the case of Woolfson v Strathclyde Regional Council [1978] UKHL 5 here
was a controversial phase in the development of the doctrine of corporate veil.74 There has been a
general tendency of the court to ignore the various separate legal groups. The nature of the
shareholding and control has helped the court to order to lift the corporate veil to a great extent.75
It has become quite necessary for the courts to lift the corporate veils of the company in the UK
and the US in order to prevent any sort of wrong doings.
71Hiltonv Plustitle [1989] 1 WLR 149Mgeladze, Teona. Piercing the Corporate Veil of Shareholder in German, US
and Georgian Legal Doctrine. J. Law (2018): 45.
72Adams v Cape Industries plc [1990] Ch 433
73Alsharqawi, Ahmad, and Abed Alkarim Alsharqawi. Separation of Ownership and Control in Corporate
Governance. JL Pol'y & Globalization 84 (2019): 65.
74Sestini,Alessandro, Alexander Kuhnle, and Andrew D. Bagdanov. Deep policy networks for NPC behaviors that
adapt to changing design parameters in Roguelike games. arXiv preprint arXiv:2012.03532 (2020).
75Woolfson v Strathclyde Regional Council [1978] UKHL 5Phiri, Siphethile. PIERCING THE CORPORATE
VEIL: A CRITICAL ANALYSIS OF SECTION 20 (9) OF THE SOUTH AFRICAN COMPANIES ACT 71 OF
2008. (2020).
30
Agency
A company who has the sole power to act as an agent can easily do so for the parent company as
it would help the company and the individual members to realize that there does not need to be
any separation between the management of the company and its other members.76 However, it
has been seen that the implementation of the doctrine to lift the corporate veil would help in
better functioning of the company.
Trust
The courts are quite keen to pierce the corporate veil in order to look after the characteristics of
the various shareholders of the company. In case the court thinks that there is a need to lift the
corporate veil in order to check the trustworthiness of the various charitable trust. The veil has
been pierced by the court on many accounts in such cases to look after the trustee and the
shareholder of the company and the case that refers to is Judgment was delivered today by the
Supreme Court in Hurstwood Properties (A) Ltd & Ors v Rossendale Borough Council [2021]
UKSC 1677.
From the above discussion it can be stated that there are various grounds on the basis of which
the corporate veil can be lifted. It can be stated from those factors that the lifting of the corporate
veil is quite necessary to keep the company in check as a single entity.78 Moreover, it can be
stated that the company needs to be well organized in order to maintain its policies and help the
company grow widely to a greater extent. The USA in that sense is the same as the policies have
been organized in order that the companies and individuals have been benefited as well.
76Piercingthe Corporate Veil. Available at: <https://www.law.cornell.edu/wex/piercing_the_corporate_veil>

Accessed on 3 August, 2021.
78Marino, Matthew. Debunking Twombly/Iqbal: Plausibility Is More than Plausible in Ohio and Other States. U.
Cin. L. Rev. 89 (2020): 1066.
31
1.10 Comparison of Statutory provisions in support of lifting veil
English Laws
● Reduction of the total number of members
Under the Section 24 of the Companies Act it has been observed that if a public company
is seen to carry on a business for a period of more than six months it has been seen that
they may be liable jointly. It has been seen that there are several companies that helps the
payment of the debts.79 It has been seen that the members who remain after a period of
six months can be sued. This part of the section has helped in identifying the liability that
helps in the attachment of the company to the director.
● Fraudulent trading
A criminal liability is offered to those companies which carry out the intention to defraud
other creditors or members of the company according to The Companies Act, 1956 80. It
can be stated that the fraudulent behavior of the company is liable to certain
imprisonment terms and conditions. However, it can be stated that this is applicable only
to certain civil insolvency acts.
The Section 213(1) states that in the course of winding up the company it might be easier
for the company to carry out the various defraud behaviour.81 The part 2 of the section
states that the court while applying for the liquidator has the right to declare that the
persons who were generally known to the parties help in carrying out the business in a
proper manner.
79Cheng-Han, T., Wang, J., & Hofmann, C. (2019). Piercing the Corporate Veil: Historical, Theoretical and
Comparative Perspectives. Berkeley Bus. LJ, 16, 140.
80Sokratous, Mina. Lifting of the corporate veil in UK and Cyprus under common law: overall dimensions of the
topic. (2017).
81Feng,Xue. Corporate Liability Towards Tort Victims in the Personal Injury Context. Diss. Queen Mary University
of London, 2018.
32
● Abuse of the company names
The Section 216 of the Insolvency Act states that an offence takes place when anyone
decides to use the name of the company for illegal matters. A person who is seen
violating the sections 216 and 217 helps a person to be held liable to the disregards of the
company.
USA Laws
In the USA it was observed that the doctrine recently enjoyed more attention as there were an
increasing number of tort claims. The law applied to this is The Alien Tort Claims Act (ATCA).
Furthermore, it can be stated that the ATCA, the various foreign plaintiffs, have the right to file
civil lawsuits in the US district courts. It has been observed that most of the tort claims that have
been identified flooding the US court have seemed to concern the various human rights and the
gross environmental violations which have been caused by the subsidiaries of the MNEs. 82It has
been observed that the various complex structures cannot be any longer characterized and
assessed by obstructing the development of the precise guidelines laid down for the piercing of
the veil.83 Hence, it can be stated that the various clauses that have been laid by the company
helps in piercing the corporate veil in a proper manner. The various cases of the Milestone
Shipping, SA v. Estech Trading LLC, 764 F Supp 2d 632, 2011 A.M.C. 968 (S.D.N.Y. 2011) or the
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) or the Ashcroft v. Iqbal, 556 U.S. 662 (2009)
have shown the importance of the various laws dealing with the lifting of the corporate veil in
the USA. However, it can be seen that the public policy required some immunity from the bostral
officers. Hence, it can be stated that the cases show exactly the ways the USA laws acts.
82Boynton, Patrick. Supervisory Liability in the Circuit Courts After Iqbal. U. Pa. J. Const. L. 21 (2018): 639.
83Milestone Shipping, SA v. Estech Trading LLC, 764 F Supp 2d 632, 2011 A.M.C. 968 (S.D.N.Y. 2011)Balharova,
M. Piercing Corporate Veil in U.S. and UK: Are we witnessing the downfall of the doctrine? [2016] 1(1) HHS ILSA
Law Journal.
33
1.11 Current judicial trends
Stating by the facts of the overriding principles it has been seen that the piercing of the corporate
veil helps in deciding the facts. From the various case examples, it has been seen that all the
cases differ from each other yet in some cases it has been seen that the parties behaved in quite
an identical manner. Along with this proposition it can be stated that in some reviews of the
recent court decisions an order has been seen that has provided a better understanding of an
application that helps to sustain various criteria in order to discuss the ways in which the
corporate companies should be treated. The piercing of the corporate veil is a highly technical
process and consists of various steps. A non-exhaustive list of the various circumstances has been
established which are as follows:
● Undercapitalization or an inadequate capitalization
● Failure to comply to the various corporate rules
● The identity of the officers or the directors
● A majority control over the stock 84
● Proper sharing of the corporate employees
● The directors, officers or the subsidiary companies generally do not act independently or
comply with the rules of the subsidiaries
● The parent corporation tends to use the property of the subsidiary companies
● There is diversion of the funds observed85
84Balharova,M. Piercing Corporate Veil in U.S. and UK: Are we witnessing the downfall of the doctrine? [2016]
1(1) HHS ILSA Law Journal.
85Home Office v Dorset Yacht Co Ltd [1970] AC 1004 (HL)Rathnayake, R. M. R. K. K. The Effectiveness of the
Piercing of Corporate Veil Under Sri Lankan Law: A Comparative Analysis of the Sri Lankan Law with UK Law.
(2020).
34
● The parent corporation is seen to have complete power of the capital of the company.
It can be stated that if there is inadequate capitalization or undercapitalization of the company

then domination can be established. Furthermore, it can be stated that the initial analysis of the
incorporation of the various corporate undertakings. From the current judicial trends, it can be
stated that the need to abolish or unveil the corporate veil and treat the company as a single entity
is highly necessary. This would help the company in increasing the gains of the company and
overlook the various unnecessary steps that generally hinder the growth of the company to a
great extent.
1.12 Chapter Summary
The chapter has helped in outlining the various steps of identifying the company as a separate
legal entity. Furthermore, it can be stated that various issues have been discussed before the
courts while lifting the veil. Instances have been provided for cases in which the corporate veil
can be lifted. Certain evidence of the exceptions has been provided in which the companies can
be treated as a separate entity. Moreover, the piercing of the corporate veil has also been
discussed here. It can be stated that the grounds under which the corporate veil can be lifted has
also been discussed in this chapter. Additionally, the comparison of the statutory provisions of
the supports in lifting the corporate veil has been discussed here. Also, the various judicial trends
at present in lifting the corporate veil have been provided in detail in this chapter.
35
Chapter 2: Thematic analysis
A thematic analysis could be considered as one of the effective parts of any research based on
which the overall portion of the study proceeds. It is true that the Lifting of Corporate Veil could
be one of the major aspects of organizational welfare and depending on that the overall
organizational welfare proceeds. It has been found that unveiling the organization is necessary
due to its proper maintained structure so that the organization could keep their employees and
their satisfaction in a fairway. The set of themes will help in providing numerous information on
the research as it provides accurate information from relevant case laws. The thematic analysis
will help in comprehensively discussing the corporate veil and discuss the internal and external
factors related to it.
Theme 1: Separate legal personality doctrine is primarily the principle of English company
law
The doctrine of Separate Legal Entity deals with the legal personality of a corporation. This
doctrine also states that a company that incorporates a judicial legal person bearing its own
duties, rights, and obligations is appropriate but completely irrelevant for its associated
shareholders and members 86. However due to these characteristics, this legal persona is
considered as independent and artificial in nature. A Corporation is a legal person and therefore
no person can own another person as the line of divergence '' occurred between a company and
its members87. The judicially exception to the doctrine of separate legal entity is the lifting of
corporate Veil, where courts neglected the separateness of cooperation between company and
members and members and outsiders88. In the context of company and members, officers who
86Lawctopus.com, 2021
87Roness,
P.G., 2017. Types of state organizations: Arguments, doctrines and changes beyond new public
management. In Transcending new public management (pp. 77-100). Routledge.
88 h t t p s : / / w w w . r e s e a r c h g a t e . n e t / p u b l i c a t i o n /
350210623_Does_Salomon_v_Salomon_Still_Reign_A_Disquisition_on_Recent_Case_Law_on_Corporate_Legal_
Personality_and_Lifting_the_Veil
36
are fraudsters are provided protection by this veil for their fraudulent actions and also for the
wrongful deeds in the name of the corporation.
For the cases of members and outsiders this law maintains corporate personality as the public
interest is the most important. The separate legal entity doctrine can be discarded for any fraud or
agency or if there any statutory provision is acting89. The Insolvency Act of 1986 defines that the
veil of incorporation can be lifted under s.213 and s. 214. In case of wrongful trading, S.214
states that the incorporation veil can be lifted. Further, under this section, directors can be proven
liable and cannot rely on legal separation if they know that there is a chance of avoiding
liquidation yet entering into new contracts90. Also this law will not allow a company to be used
as a vehicle for illegality91.
Further, when the company is used as a mere facade concealing the true facts, this incorporation
veil can be lifted. In the Jones v Lipman [1962] 1 WLR 832 case, where the defendant
established a company and tried to escape the contractual obligations, the veil was lifted.It can be
stated in this regard that The legislation formed under the command-administrative system of
governance and based on the fiction of separate corporate personality has provided a fruitful
foundation for its abuse by non-bona fide members and officers of the company. Therefore, the
doctrine of absolute separate entity does not stand up to contemporary legal analysis
92(Burnosenkova, 2020). In other cases of DHN Food Distributors Ltd v Tower Hamlets London
Borough Council [1976] 1 WLR 852, the court suggested that the separate legal personality
doctrine can be discarded between groups when parent companies and subsidiaries have a single
89Kochyn, V., 2017. Private foundation as legal entity: national legal doctrine and European legislative experience,
(17), pp.26-30.
90Parchomiuk, J., 2017. The protection of legitimate expectations in administrative law: a horizontal
perspective. Baltic Journal of Law & Politics, 2017 vol. 10, iss. 2, p. 1-25.
91 h t t p s : / / w w w . r e s e a r c h g a t e . n e t / p u b l i c a t i o n /
350210623_Does_Salomon_v_Salomon_Still_Reign_A_Disquisition_on_Recent_Case_Law_on_Corporate_Legal_
Personality_and_Lifting_the_Veil
92Burnosenkova, I.А., 2020. The concept of reverse veil piercing: its application in England and prospects for
implementation in Ukraine.
37
economic identity. The single economic identity also focuses on economics to the detriment of
legal doctrine. As per the notion of Doctrine of Separate Legal Entity,it can be also argued that
the exception is clearly expressed by parliamentary intention 93. Further, there is no certainty,
consistency when the doctrine will be disregarded94. However the separate legal personality
cannot be ignored by the interest of justice cannot ignore before the lifting of the veil,
impropriety needs to be proven and it is also needed to maintain flexibility in the concerning
areas so that the court can deal with some novel situation 95.
Discussion of Theme 1
A separate legal doctrine would help in solving the case of corporate veil easily. This would help
in understanding the various types of cases in the different countries. Moreover, it can be stated
that a separate legal personality would help in increasing the jurisdiction in a better manner.
Thus, from this theme it can be stated that the doctrine of jurisprudence of piercing of corporate
veil is quite different in the two countries.
Theme 2: Similarities between US and UK’s statutory provisions support lifting

ofcorporate veil
The Companies Act, 2013 (CA act, 2006) describes the provisions that enable courts to lift the
corporate veil. Under section 2(20), of the Companies Act 2013, it is mentioned that a company
is a legal entity that has a set of members, people and association with some specific objectives.
Corporation. Partnership and proprietorship are the line of business structure that a company
needs to follow. However, as per the opinion of Justice Marshall, a company is considered as an
93Law.uok.edu.in, 2021 Available at: http://law.uok.edu.in/Files/5ce6c765-c013-446c-b6ac-b9de496f8751/Custom/

company_intro.pdf [Accessed on: 21-09-2021]
94https://phdessay.com/the-doctrine-of-separate-legal-personality/
95Wheatley, Natasha. Spectral legal personality in interwar international law: on new ways of not being a state. Law
and History Review 35.3 (2017): 753-787.
38
artificial person with no physical existence 96. Further he also suggested that a company is
intangible, invisible, and only exists in contemplation of law97.
● Reduction in the count of members: In case of a private company, if the number of

members falls below two and for a public company if that number falls below seven, the
company has been given only six months of time to still carry on the business. Further
each person who is a member of that company can still continue the business knowing
that fact the number of members is reduced. After the six months is over, the company
and its members are held liable and sue an amount that they have earned in this six
months’ tenure. This is as per Companies (Amendment) Act, 2017 Section 3A after
Section 3 in the Act (Companies Act). This is in an addition in the law and describes
the Liability of Members in certain Cases.
● Failure to pay back the application fee: Directors of companies are solely or jointly liable
to refund the application fees with proper interest which at present is 6% per annum from
the 130th day of the date of expiry98.In this respect both UK and USA law is similar.
● Improper company’s name: If an officer of a company signs any bills of trade ,check,
promissory note and if the name of the company is not referenced as per the
recommended way , then the officials accounted as personally liable to the holder of that
bills of trade and others items if the company is not properly paid those items. According
to International bills of Exchange and International Promissory Notes of UN, the
payment of bills and exchange has been stated that refer to get the personal liable of the
holder of the mentioned bills.
96Ddegjust.ac.in, 2021 Available at: http://www.ddegjust.ac.in/studymaterial/bba/bba-201.pdf [Accessed on:

21-09-2021]
97Ojiako, U., Chipulu, M., Marshall, A. and Williams, T., 2018. An examination of the ‘rule of law’and
‘justice’implications in Online Dispute Resolution in construction projects. International Journal of Project
Management, 36(2), pp.301-316.
98awlex.org/lex-pedia/lifting-of-corporate-veil-under-the-companies-act-2013/26061
39
● Fraudulent Trading: Ensure fraudulent trading and regarding the lifting of the corporate
veil are mentioned in section 339 of the Companies Act 2013. In the time of ending a
company, if it is found that the business of the company has been carried by defrauding
creditors or any person having fraudulent purposes are found to be personally responsible
without the limitation of liability. Related people with the fraudulent activities having the
knowledge of such fraud will be held liable and will be punished.
● Investigation of company’s ownership: According to section 216 of the Companies Act

2013, if the central government wants to investigate the individuals who are really
interested in the company and control its policy, they can appoint an inspector and report
on the membership of the company. In this respect, the central government can ignore the
restriction of the corporate veil99.
On the other hand, the corporate veil protects the shareholders from being liable for the actions
made by companies. 100Further, there are no absolute rights for the court to take decisions against
shareholders to prove them liable or not for the concerning revoke of the veil and in such cases;
court needs depend on the facts of the cases. There are some statutory provisions that support the
lifting of the Corporate veil. The statutory provisions help in increasing the awareness about the
lifting of the corporate veil.
Theme 3: Differences between corporate veil doctrine approach of US is liberal compared

to the UK
The ‘veil doctrine approach’ refers to a condition where shareholders are responsible for the debt
of a particular company. In this case, the rule of limited liability for shareholders is not valid and
hence, the individual personality approach becomes meaningless. The 'veil of doctrine' invokes
99lawlex.org/lex-pedia/lifting-of-corporate-veil-under-the-companies-act-2013/26061
100Karmaza, O. O., et al. Application of piercing the corporate veil doctrine in the Ukrainian law. (2019).
40
when responsible shareholders blur the curtain between a corporation and its shareholders. After
going through several studies, it has been noticed that ‘corporate veil law’ in the US is quite
distinctive and liberal as compared to English law in the UK.
The principle of limited liability in the US was introduced in the late nineteenth century, and
later, this principle had become a norm and was named as 'entry law doctrine’ 101. The corporate
veil doctrine law in the US can be considered ironic. A significant issue of this law generates due
to numerous state jurisdictions and countless sources of legal regulations on this issue. Moreover,
the federal level incorporates possible conflicts of the law. Therefore, having many states and
various directions, the US faces tremendous additional problems while choosing an applicable
law for all. For example, piercing corporate veil law is significantly different in Florida and
Alaska. Only two relevant documents are granted in Florida while appealing for 102'lifting the
corporate veil', which includes proof that the alleged shareholder or company is engaged in
improper activity and presence of ego with the concerned corporation. 103However, disjunctive
and conjunctive tests are required in Alaska in order to pierce the veil by the concerned state
court. Fruitful attempts have been made to harmonize these state laws for easy understanding and
fast delivery of legal order. As of now, merely three significant activities have been granted
during 'lifting of corporate veil' these are 'alteration of the ego', 'fraud or injustice behaviour' and
‘injuries or unjust loss’104.
101Klingsberg, Ethan A. Penetrating the Entry Doctrine: Excludable Aliens' Constitutional Rights in Immigration
Processes. The Yale Law Journal 98.3 (1989): 639-658.
102Vastardis, Anil Yilmaz,and Rachel Chambers. Overcoming the Corporate Veil Challenge: Could Investment Law
Inspire the Proposed Business and Human Rights Treaty?. International & Comparative Law Quarterly 67.2 (2018):
389-423
Mujih, Edwin. Piercing the corporate veil: where is the reverse gear?. Law Quarterly Review 133 (2017): 322-337.
103Lvov,
A.M., 2017. Preserving Limited Liability: Mitigating the Inequities of Reverse Veil Piercing with A
Comprehensive Framework. UC Davis Bus. LJ, 18, p.161.
104Vastardis,A.Y. and Chambers, R., 2018. Overcoming the Corporate Veil Challenge: Could Investment Law
Inspire the Proposed Business and Human Rights Treaty?. International & Comparative Law Quarterly, 67(2),
pp.389-423.
41
The Florida case study is obtained from produced by The Berkeley Electronic Press from an
article named Nova Law Review. Dania Jai Palace, Inc. v. Sykes the Supreme Court tend to held
up veil which might not be absent showing of inappropriate conduct. A lengthy passage was
quoted by dania court which was dealing with this specific case and got so many support from
aristocrats. Court has made a decision of reducing the passage to a flexible formula which is able
to detect improper conducts105. However, practitioners in Florida face issues regarding unclear
guidelines which help in evaluating question wills warrants. The main objective of this paper was
to analyse Dania and cases and the decision made on dania case as well as the factors
determining improper conduct. Additionally, this article helps in examining Oregon law to find
out relationships between corporate veil and estoppel106. For evaluation of Dania case, a brief
case history and the theories connected to corporate veils can be considered to be a necessary
approach 107.
A significant attention is given to 'corporate veil law' in the United Kingdom, and English
regulations are considered conservative in nature as compared to the United States. US courts
have a tendency to hide their reluctance, whereas UK courts oppose this concept. In the warning
situation, the UK court offers low interventions, which is entirely opposite to the US court
activities. Being a small country, a noticeable harmony in state laws is present within the states
of the UK, which make control over 'corporate veil law' more straightforward and quicker.
Hence, it can be stated that here is significant amount of difference found between the doctrines
of jurisprudence of the UK and the US. As a result of the differences, it can be stated that there is
a significant difference between the approach of providing justice to the cases.
The discussion of theme 3 can be related to a recent study which has revealed that US courts
have a low tendency to permit lifting of corporate veil law which is quite similar with UK
105 Mujih, E., 2017. Piercing the corporate veil: where is the reverse gear?. Law Quarterly Review, 133, pp.322-337.
106 Yadav, P., 2017. Lifting of Corporate Veil. Available at SSRN 2951569.
107Brooks, Graham, et al. Fraud, error and corruption in healthcare: a contribution from criminology. (2017): 25-44
42
regulations. 108This can be caused by inefficient use of law applications which denies the right of
litigants. Moreover, lack of guidance regarding this law has turned into ‘choice with no choice
approach’ in the US. Hence, from the above study it can be stated that the approach of the courts
is quite different from each other. The judicial systems of the US are quite different from that of
the UK. This can be stated from the different ways in which the two countries have dealt with the
cases of piercing of corporate veil.
Theme 4: Presence of reverse piercing has a disparity in UK and US
In the regulation of the UK, there is a total absence of forward and reverse piercing of ‘corporate
veil law’. There is an argument that the Supreme Court of the United Kingdom has missed to
develop forward piercing and reverse piercing in its legal regulations. This was extremely
noticeable during the case of Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415
in 2013.
This scenario is entirely different in the context of the US. Outside reverse piercing occurs when
any third party seeks to pay off this debt of the company controller from the company. This
concept emerged as 'theory of recovery', and hence, many US states have started to reject reverse
piercing. While studying reverse piercing, two differentiated approaches are followed by US
courts. Thus, from the theme it can be stated that the reverse piercing has a significant amount of
disparity between the UK and the US109.
The theme has shown the various 'inverse method of reverse piercing' and 'equitable result
approach'. In the inverse piercing, the court follows traditional methods of piercing while
108Cheng-Han, T., Wang, J. and Hofmann, C., 2019. Piercing the Corporate Veil: Historical, Theoretical and
Comparative Perspectives. Berkeley Bus. LJ, 16, p.140.
109Kingston Dry Dock Co. v. Lake Champlain Transp. Co., 31 F.2d 265 (2d Cir. 1929)
43
additional requirements are imposed by the court for an equitable result approach110. It is
obtained to protect diverse ideas from the effects of reverse piercing. The presence of reverse
piercing has helped ben observed to have a disparity in the UK and the US. It can be stated that
the presence of the disparity between the UK and the US are due to the negligence of the
jurisdictions. From the discussion it can be stated that the methods of inverse and the reverse
piercing has helped in the lifting of corporate veil.
Theme 5: Development trend of ‘doctrine of corporate veil approach’ in UK and US
In order to understand the recent development of this law, it is important to understand the
historical background behind its formation. Historical development of 'corporate veil doctrine' in
the UK was divided into three periods like ‘early experimental’, ‘heydey of doctrine’ and
‘diminishing popularity of doctrine’111. The early experimental period was laid by ‘Salomon vs
Solomon’ where shareholders were detached from the company and regarded as separate legal
personalities. Limited liability act was not established in Act of 1855in UK. in this act, UK court
was not supposed to have any lifting regulations which has been the first distension with US112.
'Hyde of doctrine' was formulated after World War II, which lasted up to1978.Woolfson v
Strathclyde Regional Council [1978] UKHL 5''case had made an end of this period. Though the
concept of ‘corporate veil lifting’ was unknown to UK courts, Lord Denning was the first man in
the UK who showed interest in piercing the veil. Furthermore, during the case of Adams v Cape
Industries plc [1990] Ch 433 these lifting regulations were started as a regulation in the UK.
However, a diminishing popularity of 'corporate veil Doctrine law' has taken place since 1978
when the English court rejected the argument of a single economic unit and put the importance
of law above it113. This was clear during the case of Bank of Tokyo vs Karoon1987 [AC 45].
110Horvathova, A. and Stanescu, C.G., 2017. Piercing the Corporate Veil: US Lessons for Romania &
Slovakia. Chi.-Kent J. Int'l & Comp. L., 17, p.1.
111Macey, J.C., 2019. What corporate veil?'We the Corporations'. Michigan Law Review, 117(6), pp.1195-1214.
112Karmaza, O.O., Makhinchuk, V.M., Derkach, A.L., Spektor, O.M. and Sheludchenkova, A.S., 2019. Application
of piercing the corporate veil doctrine in the Ukrainian law.
113BARKATULLAH, A.H., 2017. Implementation of limited liability principles and doctrine of piercing the corporate veil in management of local liability companies. Journal of Advanced Research in Social Sciences and Humanities, 2(6), pp.348-357.
44
However, after the acquisition of Lord Denning UK courts showed interest on corporate veil
lifting and that have helped the all overall operations reading the corporate veil. Here, the case
briefly states that Lord Denning first showed high internet in the ‘corporate veiling’ and more
cases on it helped its popularity. It is observed that the 1978 corporate veil doctrine law case was
repeated in the year 1987 and are quite relevant.In this particular case, Cape Industries, which
was a registered company in the UK and was a company that engaged in the asbestos mining
business in South Africa, was sued by a worker from one of its subsidiaries in on the basis that he
contracted a disease after inhaling asbestos dust. The company workers sued Cape Industries as
parent company to be held liable and to pay compensation to the plaintiffs through a series of
class actions.114
'Lifting of the corporate veil law was quite primitive in US regulations as compared to the UK.
From the very beginning, UK regulations sought 'piercing of veil' to promote unity between
shareholders and concerned organisations. In order to establish the unity part of the test, US
regulations have developed certain parameters from its early stage115. These include failure to
observe corporate formalities, absence of separate offices and treatment of organisations as a
mere shell116. Corporate laws of the US are based on state law and follow two traditional
formulations. These are 'instrumentality doctrine' and 'alter ego doctrine117. The instrumentality
doctrine was first outlined in Lowendahl vs Baltimore O.R. Co 247APP.DIV.144
[NYN.Y.APP.DIV 1936]Which requires more than control of the corporate entity. However, the
alter ego doctrine was first postulated in the case of RRX Industries, Inc. v. Lab-Con, Inc., 772
114Kusuma, N.C.E. and Amboro, F.Y.P., 2020. Doing the Corporate Business with Piercing the Corporate Veil
Doctrine: Indonesia, Us And Uk Perspective. Sociological Jurisprudence Journal, 3(2), pp.126-129.
115Hornuf, L. and Schwienbacher, A., 2017. Should securities regulation promote equity crowdfunding?. Small
Business Economics, 49(3), pp.579-593.
116Cheng-Han, T., Wang, J. and Hofmann, C., 2019. Piercing the Corporate Veil: Historical, Theoretical and
Comparative Perspectives. Berkeley Bus. LJ, 16, p.140.
117Prentice,
M., 2017. Ranks & Files: Corporate Hierarchies, Genres of Management, and Shifting Control in South
Korea's Corporate World (Doctoral dissertation).
45
F.2d 543 (9th Cir. 1985) highlighting two different cases118. Unity of ownership and existence
was permitted and stated that individuals and corporations are no longer separate in the US.
Besides, inequitable results may follow when the concerned corporation is alone. 119A major
distinction was removed between alter ego doctrine and instrumentality doctrine during the case
of Wm. Passalacqua Builders v. Resnick Dev. South, 608 F. Supp. 1261 (S.D.N.Y. 1985). The two
cases are discussed that have helped in providing information on the owner and its permitted
results and also provided a separate ownership and existence to the United States.
This theme helps in outlining the distinction between the US and the UK. After the case of Wm.
Passalacqua Builders v. Resnick Dev. South, 608 F. Supp. 1261 (S.D.N.Y. 1985)., US regulation
stated the results as ‘indistinguishable' and can be considered as ‘interchangeable’. From the
above discussion it can be stated that the development of the doctrine of corporate veil has
helped in increasing the approach towards solving the cases120. The various jurisdiction of the
countries would help in solving the problems corporate veil in different manner. For
understanding the ongoing system of law and development in recent years, historical ground
must be analysed to evaluate this circumstances. Corporate doctrine and its historical ground was
divided into three parts as mentioned in UK such as early experimental, doctrine and heyday and
diminish popularity. Solomon vs Solom on laid by early period of experimentation, moreover
company detached their stakeholders and regarded as different independent personality. It can be
stated that UK court did not have any regulations related to uplifting authorities which can be
recognised as only dimension in US. Ideation of corporate veil was not familiar in the boundaries
of UK court and Lord Denning showed the urge to implement it. Corporate veils and its lifting
118RRX Industries, Inc. v. Lab-Con, Inc., 772 F.2d 543 (9th Cir. 1985)Vastardis, Anil Yilmaz, and Rachel Chambers.
Overcoming the Corporate Veil Challenge: Could Investment Law Inspire the Proposed Business and Human Rights
Treaty?. International & Comparative Law Quarterly 67.2 (2018): 389-423
119Mujih, E., 2017. Piercing the corporate veil: where is the reverse gear?. Law Quarterly Review, 133, pp.322-337.
120Wm. Passalacqua Builders v. Resnick Dev. South, 608 F. Supp. 1261 (S.D.N.Y. 1985
46
can be considered as a primitive approach as compared to US regulations. Piercing veils were
said to be promoted to settle down the relationship as well as bonding between the stakeholders
and an organization. It failed to observe and evaluate facilities in corporals and the treatment of a
company which can be a drawback of this veil. Ownership unity allows working together and it
had been stated that individual and the authorities are indifferent. Discrimination between
doctrine ego as well as instrumentality has been removed in circumstances of Passalacqua case in
1985.
There is a significant difference between UK and US veil-piercing jurisprudence
An overview of UK and US veil-piercing laws reveal significant differences. Veil piercing

jurisprudence is largely based on facts and several categorizations that enforces court to prepare
a neat categorisation in the United Kingdom. In addition, generalisation is given quiet
importance’s to gain neat understanding of the overall trend of law in each jurisdiction. In most
cases, UK courts have shown a hesitant mentality to lift this corporate veil. The veil-piercing test
in UK law is shared similarly to US and often appears identical. According to UK law, the
corporate veil can be uplifted when achievement of justice becomes extremely necessary. Thus,
an 'alter ego' concept can be found in UK regulation sometimes. There is a significant difference
between law of US and UK and it has been depicted that piercing veil is based on specific
categorisation. Overall generalisation has got importance to gather detailed understanding over
piercing veil and its background. Sometimes both the laws can be identical when judgemental
achievements become mandatory and alter ego concepts emerged in UK.
The role or the activity of shareholders is considered as negligible in UK's law of 'corporate veil
piercing'. A number of UK court decisions have shown a general reluctance to pierce the
corporate veil. UK courts give emphasis on piercing the corporate veil in international acts of
depiction in order to abide by legal duties. For an example, the case ofRe A Company Ltd. v.
Vwagh, [1985] BCLC 333, piercing of the corporate veil was extremely needful as human rights
were violated underlying social, economic, and moral factors of the employees121. This issue is
121 Dignam, A., 2020. Company law. Core Texts Series.
47
connected with multinational companies which have responsible subsidiaries for the violation of
human rights. 122However, the Supreme Court of UK has clarified the English law position that is
recently issued and states that a claimant can ignore the separated legal personality of a company
and can pierce the corporate veil in specific circumstances123. In the case of Bigos v Bousted
[1951] 1 All ER 92 (KB) it was observed that the plaintiff had argued that the loan was treated as
a void because of the contract for the loan. Thus, it can be stated that the lifting of corporate veil
is very important to abolish such illegal practices.In this respect the case was undertaken by
district court of the UK.
The US courtroom is drastically liberal inside the context of 'company veil piercing' regulation
which has a significant historical history. Unlike UK law, US courts have no hesitation within the
veil lifting to promote justice and fairness in operation. US statutes and current legal guidelines
offer a much broader possibility in veil piercing of infinite subsidiary groups. Similarly, the best
company veil piercing litigation instances have been positioned inside the US. but, veil piercing
jurisprudence of the us has different conditions. US Court can be considered as relatively liberal
in terms of implementing corporate veil which is said to have a glorious historical significance.
US government provides chances to piercing veils and several litigation of piercing veil have
been registered. Corporate veil can be lifted only in certain circumstances where there is a
control over parents. In terms of avoiding injustice, piercing veil can be applicable as mentioned
in UK legislation and US law as well. It can be concluded that there is certain discrete aspects
about how both the countries control cases.
As per the US court, lifting of corporate veil can be done only when there is a significant control
of the parent over the concerned subsidiaries. Moreover, the piercing of the veil can be
considered when injustice occurs. Injustice activities incorporate illegal, fraudulent or any kind
of improper conduct, practiced by controlling authority. In the US, veil piercing has become a
122Kusuma, Ng Catharina Enggar, and Fl Yudhi Priyo Amboro. Doing the Corporate Business with Piercing the
Corporate Veil Doctrine: Indonesia, Us And Uk Perspective. Sociological Jurisprudence Journal 3.2 (2020):
126-129.
123Hudson, A., 2017. Understanding company law. Routledge.
48
frequency association of law that is practiced to prevent misleading international actions. Before
piercing the corporate veil, US court creates a reasonable belief and support by both subsidiary
and parent. 124Considerable triggered forces of veil piercing in the US are undercapitalisation,
commingling of assets and non-observance of formalities. During the case of United States v.
Milwaukee Refrigerator Transit Co., 145 F. 1007 (1906) Us court has been started that it may
disregard corporate entities and treat an association as an individual when the option of legal
entity is discarded by wrong justification, protect fraud activities and defend crime. 125 From the
above study it can be stated that there is a significant difference between the ways in which the
UK and the US handle the cases. Lifting of the corporate veil and the jurisprudence of the
countries lead them to tackle the changes in an efficient manner.
The method of distinction between the US and the UK it has been seen that the jurisprudence is
quite different. It can be stated that this theme has helped in outlining the difference in passing
the judgements in the piercing of the corporate veil. The corporate veil has led to increased
corruptions in the present scenario. The method of distinction among America and the UK it's
been visible that the jurisprudence is pretty one of a kind. It may be said that this topic has
helped in outlining the difference in passing the decisions within the piercing of the company
veil. The company veil has improved corruptions inside the gift state of affairs. That is mainly
because the corporate veil holds the employer as a separate entity which leads the ones in the
back of the veil to have the authority to act independently to a degree. Within the present state of
affairs the effect and the impact of the corporate veil ends in the improvement of a separate entity
124Bigos v Bousted [1951] 1 All ER 92 (KB)Banoo, Shaheen. Lifting of the Corporate Veil: Decoding the Doctrine
of Separate Legal Personality. Available at SSRN 3609245 (2018).
125United States v. Milwaukee Refrigerator Transit Co., 145 F. 1007 (1906Cheng-Han, Tan, Jiangyu Wang, and
Christian Hofmann. Piercing the Corporate Veil: Historical, Theoretical and Comparative Perspectives. Berkeley
Bus. LJ 16 (2019): 140.
United States v. Milwaukee Refrigerator Transit Co., 145 F. 1007 (1906)Spotorno, Agustin Ricardo. Piercing the
corporate veil in the UK: The never-ending mess. Business Law Review 39.4 (2018).’
Thennakoon, Nishadi. Modern Financial Regulations Have Made ‘Piercing the Corporate Veil’Easier. Journal of
Association of Professional Bankers Sri Lanka (2020).
49
in an unmarried organization itself. Furthermore, it could be stated that it's far because of these
factors that the piercing of the company veil becomes important. As a result, in the present
situation the effects and the consequences of the company veil has come to be a matter of
tremendous difficulty.
Summary
The thematic analysis has helped in understanding the various ways in which piercing the
corporate veil has helped in increasing the transparency between the shareholders and the
directors. Moreover, it can be stated that the thematic analysis has revealed that the piercing of
the corporate veil has helped in increasing the productivity of the corporate sectors. Furthermore,
it can be stated that the various cases have been mentioned here has helped in understanding the
various illegal actions of the company. Thus, it can be stated that piercing of the corporate veil
would help in increasing the communication between employees and the managing board of the
company.
Conclusion
Implication of the study
However, it has been identified that protection of liability is very important though it is not
regarded as absolute. It is also identified that piercing the invisible ironic curtain takes off the
distinction between shareholders and corporation which is acceptable. In many cases it has been
observed that responsible persons or management bodies take advantage of such curtains and use
them illegally. They conduct fraudulent actions and misuse their activities for self benefits which
directly affects the process.. The presence of a corporate veil helps in shading the illegal and
immoral activities from the rest of the shareholders. Therefore, implementation of the 'piercing
of corporate veil' can be beneficial for global or any kind of organisation to secure its property by
promoting justice and equal opportunities. This study has significant implications for the
business organizations as well as international cooperative firms in the long run. After going
through this study intensively, shareholders and cooperative bodies can have in-depth knowledge
50
of the importance of piercing the cooperative veil. Moreover, the Government of the UK can
become liberal and encourage piercing of such law for several benefits. The law would help the
UK government in minimizing fraudulent activities and create a better business space for many
organizations.
For the shareholders, this study has an important implication as in many cases, shareholders
became liable for properties due to lack of knowledge of this law. Therefore, implementation of
126this study can bring ultimate benefits from injustice and illegal corporate activities. By sound
implementation of this study, shareholders can protect themselves from ill practices and be able
to know its consequences. Moreover, UK and US courts can alter their punishment system to
prevent crime cases and illegal activities. Often Shareholders become victims of ill effects of the
acts done in the company name and suffer lifetime. Profound implementation of this
investigation can be helpful enough to promote parity and awareness between the organisation
and its shareholders. Com palliative study between UK and US regulations can improve laws for
both the countries. Besides, sound implementation of this research can help to understand the
need for separate legal entities of both directors and shareholders.
Discussion
The US is extremely liberal in 'corporate veil law' while the UK court is reluctant to consider it's
piercing. In the US, these laws are different from one state to another and follow both
conjunctive and disjunctive tests. 'Entry law doctrine' was first postulated in the US which offers
equal liability. In the case of 'lifting corporate veil', US Court follows main three aspects such as
'alteration of ego', 'unjust losses' and 'injustice of fraud activities'.127English law of 'corporate
veil' is extremely conservative and has gone through three main stages such as 'early
126Bainar, Ajay,and Gourav Gulati. LIFTING THE CORPORATE VEIL CORPORATE CRIMINAL LIABILITY.
Słup, Paweł. Piercing the Corporate Veil–A Common Pattern?. Comparative Law Review 24.1 (2018): 287-305.
McGowan, Jamie. Veil Piercing in the UK: An Evolution of Doctrinal Approaches. De Lege Ferenda 2 (2019): 92.
127Magcamit, Michael. Explaining the three-way linkage between populism, securitization, and realist foreign
policies: President Donald Trump and the pursuit of America first doctrine. World Affairs 180.3 (2017): 6-35.
51
experimental', 'heyday of doctrine' and 'diminishing popularity of doctrine'. 128The three stages
have helped in providing a comprehensive discussion on the corporate veil and provided an
further understanding on the subject.
Before World War II, UK court was entirely unknown about 'piercing of corporate veil' and it
was first introduced by Lord Denning and from Adams v Cape Industries plc [1990] Ch 433
case 'lifting or piercing law' took place in the UK129. However, this practice is quite primitive in
the US context, while this has become common in other continents too. Piercing of the corporate
veil takes place during the existence of wrongdoing behind the curtain, failure to maintain
separate legal personality, inadequate capitalisation and non-accordance of corporate formalities.
Broadly, under statutory provision and judicial interpretation, this veil can be lifted for all
nations. However, the processing is quite familiar in other countries if it is compared with the
United Kingdom.
Study Limitation
Although for justice and equal opportunity of both shareholders and company 'lifting of
corporate veil and decoding separate legal personality is important, it still has many limitations
while sound implementation. Moreover, countless limitations are faced during compliance of this
study which is described below. However, it is identified that the scope of study is complex and
having many advantages and disadvantages as well.
Financial risk of veil piercing
Limited liability is considerable for shareholders once a piercing of the veil takes place.
However, increased complexities of veil lifting may increase the financial liability of
shareholders. It creates a significant financial threat to them with foreseeable accidents. Thus
unlimited liability can facilitate extreme danger for smooth business operation.
128Moynihan, Donald, and Alasdair Roberts. Dysfunction by Design: Trumpism as Administrative Doctrine. Public
Administration Review 81.1 (2021): 152-156.
129Słup, Paweł. Piercing the Corporate Veil–A Common Pattern?. Comparative Law Review 24.1 (2018): 287-305.
52
Increased paperwork
Piercing of the corporate veil is a complex and lengthy legal process that includes plenty of proof
of documents against injustice. Lots of paperwork makes this process complex and hectic ad
often continues for years. This becomes monotonous during international cases and makes
shareholders impatient.
Lack of academic resources
There is a lack of resources related to the 'corporate veil', and this became a challenge while
collecting information on UK and US regulations. Over confidentiality of recent cases have
supported in minimum However, the study do not provided much data and academic resources t
o support corporate veil or related, thus becoming a major challenging factor.
Time constraint130
For legal research, adequate time is required to collect information and overcome confidentiality.
However, for fast compliance urgency, time has been a main constraint to collect real incidents
and case studies which leads to little manipulation.
Recommendation
Improvement in legal flexibility
As ‘Lifting of corporate veil is a serious matter of concern therefore, jurisdiction courts are
recommended to increase work flexibility with sound investigation of truth. For this, extra
130Kamdar, Naman, and Akash Srinivasan. Solving the Bad Loan Crisis in the Unconventional Way: Is Reverse
Piercing the Corporate Veil a Solution?. NUJS L. Rev. 12 (2019): 169.
Mujih, Edwin. Piercing the corporate veil: where is the reverse gear?. Law Quarterly Review 133 (2017): 322-337
Marobela, Mmatjie Meriam. Piercing of the corporate veil in a holding/subsidiary relationship. Diss. University of
Pretoria, 2017.
53
workforce can be appointed for fast paperwork and proof check. Improvement of flexibility is
vital for international cases.
Quick actions
Many cases last for a prolonged year which affects the natural corporate work flow of the
organisation. Lethargic actions increase the vulnerability of shareholder’s livelihood. Thus,
Courts and legal investigators are recommended to act quickly.
Conclusion
Implementation of 'lifting corporate veil' is extremely necessary for every organisation with low
liability and separate legal personality is important for equality and justice. However, the UK
needs to be more liberal on this, and the US requires a legal harmony. For legal aspects,
paperwork makes this procedure quite lengthy. Therefore, both of the national Courts are
recommended to increase flexibility and quick actions to overcome illegal actions by developing
punishment structures. Piercing the veil can be beneficial for the global reputation of an
organisation and enhance employee performance too.
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Faculty of Business, Law & Social Assessment

Sciences Coversheet and

Feed Forward:How to apply the feedback to future submissions

Quality and use of Standard English and Academic Conventions

Fail Fail Pass Strong Very Strong Exceptionally

(merit) (distinction) (distinction)

Criterion Undertake autonomous research/work experience making use of specialist

Concept of Lifting of Corporate Veil

Meaning of Lifting the Corporate Veil

5Lee vs Lee Air Farming Limited [1960] UKPC 33)\.<https://lawlex.org/lex-pedia/lifting-of-corporate-veil-

1.1 Background of the study

13VALIDITY OF GUARANTEES FOR DEBTS OF MINORS https://onlinelibrary.wiley.com/doi/pdf/10.1111/

21 Definition and Examples of Fraud Available at: https://www.thoughtco.com/fraud-definition-and-

1.2 Problem statement

29Gilford Motor Co Ltd v Horne [1933] Ch 935

1.3 Company: A separate Legal entity

35Salomon v A Salomon and Co Ltd [1897] AC 22

37Macaura v Northern Assurance Co Ltd [1925] AC 619

38Reverse veil-piercing in Singapore and its consequences. (2018) <https://heinonline.org/hol-cgi-bin/

A company can be regarded as an artificial person or in other words it can be regarded as a

39Lee v. Lee Air Farming Ltd. [1960] UKPC 33

42Gallagher v. Germania Brewing Company, [1893] 53 MINN. 214

46Simamora, Y. Sogar, SujayadiSujayadi, and YuniartiYuniarti. BINDING EFFECT OF ARBITRATION CLAUSE

47Walkovszky v. Carlton, 223 N.E.2d 6 (N.Y. 1966)

1.5 Instances when the corporate veil can be lifted

Protection of the Revenue

55Jones v Lipman [1962] 1 WLR 832

Determining the enemy character

1.6 Exception to separated entity principles

62The Doctrine of Lifting Veil Available at: https://thecompany.ninja/lifting-corporate-veil/ [Accessed on:

1.7 Lifting of Corporate Veil

Abusing legal regulation of companies deserve proper punishments to formulate strict

1.9 Grounds under which the veil is lifted

72Adams v Cape Industries plc [1990] Ch 433

76Piercingthe Corporate Veil. Available at: <https://www.law.cornell.edu/wex/piercing_the_corporate_veil>

● Reduction of the total number of members

● Undercapitalization or an inadequate capitalization

● Failure to comply to the various corporate rules

● The identity of the officers or the directors

● A majority control over the stock 84

● Proper sharing of the corporate employees

● There is diversion of the funds observed85

It can be stated that if there is inadequate capitalization or undercapitalization of the company

1.12 Chapter Summary

Theme 2: Similarities between US and UK’s statutory provisions support lifting

93Law.uok.edu.in, 2021 Available at: http://law.uok.edu.in/Files/5ce6c765-c013-446c-b6ac-b9de496f8751/Custom/

● Reduction in the count of members: In case of a private company, if the number of

96Ddegjust.ac.in, 2021 Available at: http://www.ddegjust.ac.in/studymaterial/bba/bba-201.pdf [Accessed on:

● Investigation of company’s ownership: According to section 216 of the Companies Act

Theme 3: Differences between corporate veil doctrine approach of US is liberal compared

Theme 4: Presence of reverse piercing has a disparity in UK and US

Theme 5: Development trend of ‘doctrine of corporate veil approach’ in UK and US

There is a significant difference between UK and US veil-piercing jurisprudence

An overview of UK and US veil-piercing laws reveal significant differences. Veil piercing

121 Dignam, A., 2020. Company law. Core Texts Series.

123Hudson, A., 2017. Understanding company law. Routledge.

Implication of the study

Financial risk of veil piercing

Lack of academic resources