The recent Supreme Court decision of Prest v Petrodel Resources Ltd and Others (‘Prest‘) has been celebrated by many as much-needed clarification to a fundamental area of English company law – corporate veil piercing. However, to take such a view is to be overoptimistic.
Consequently, what happened in Prest v petrodel?
In Prest v Petrodel [2013] UKSC 34 the English Supreme Court undertook a review of the principles of English law which determine in what circumstances, if any, a court may set aside the separate legal personality of a company from its members and attribute to its members the legal consequences of the company’s acts.
Also question is, who can pierce the corporate veil?
In general, creditors have no recourse against corporate shareholders, as long as formalities are satisfied. When, however, the corporation is fraudulently created to escape liability, then creditors may pierce the corporate veil.
What is the evasion principle in Prest?
The ‘evasion principle‘ involves making a company liable where its separate legal personality has been used to frustrate legal rights which third parties may have against its owner.
What is corporate veil in law?
A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company’s debts and other obligations.
What is the Salomon principle?
Abstract. For over a century UK courts have struggled to negotiate a coherent approach to the circumstances in which the Salomon principle –that a corporation is a separate legal entity–will be disregarded. … Individual shareholders are more susceptible to disregard than corporate shareholders.
When can the corporate veil be pierced UK?
The corporate veil can only be pierced if there is some “impropriety.” The court cannot pierce the corporate veil just because the company is involved in some impropriety. The impropriety must be linked to the use of the company structure to avoid or conceal liability.
What are the circumstances when corporate veil can be lifted?
FRAUD OR IMPROPER CONDUCT– the most common ground when the courts lift the corporate veil is when the members of the company are indulged in fraudulent acts. The intention behind it is to find the real interests of the members. In such cases, the members cannot use Salomon principle to escape from the liability.
Is there a difference between lifting and piercing the corporate veil?
Lifting the veil of incorporation or better still; “Piercing the corporate veil”: means that a court disregards the existence of the corporation because the owners fail to keep one or more corporate requirements and formalities. The lifting or piercing of the corporate veil is more or less a judicial act.
Is it hard to pierce the corporate veil?
This legal structure creates an entity separate from the individual. … It is expensive and difficult to pierce the corporate veil and get a judgment against the individual behind the company.
How do you stop piercing the corporate veil?
5 steps for maintaining personal asset protection and avoiding piercing the corporate veil
- Undertaking necessary formalities. …
- Documenting your business actions. …
- Don’t comingle business and personal assets. …
- Ensure adequate business capitalization. …
- Make your corporate or LLC status known.
Is piercing the corporate veil a separate cause of action?
Piercing the corporate veil is not a cause of action but instead a “means of imposing liability in an underlying cause of action.” … In piercing the corporate veil, the objective is to reach assets of an affiliated corporation or individual shareholders.
