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Justin Santiago, BAppSc (Hons), MBA, LLB (Hons) comes from a journalism, market research, intellectual property and strategic communications consulting background. Now based in Melbourne he spends his time advising businesses on how to communicate to their customers as well as writing on various subjects of interest in this blog.

Sunday, March 22, 2009

Corporate Veil

The ‘corporate veil’ refers to the separation of legal identity between parent firms and their subsidiaries, which gives the parent protection against the liabilities of its subsidiaries.

1 comment:

  1. The above is a group structure theory, which provides a second level of protection for parent companies, against claims received by their subsidiaries, usually located in other jurisdiction.

    The first level of protection accorded by the corporate veil, is actually between the shareholders and the company itself as a legal entity with corporate personality.

    The implication of this first level protection is that the liabilities of the incorporated company cannot be shifted to the shareholders personally.

    Case in point : Solomon v Solomon, essentially the judgement of Lord McNaughton in the House of Lords. In contrast to the judgement of Lord Kay in the Court of Appeal.

    Do note that in some cases involving tort claims, personal injury etc the Courts are willing to "pierce or "lift" the corporate veil , though not automatically as Lord Denning would like it to be.

    The Courts have power & discretion only to pierce or lift the veil, but certainly not to remove it completely because the corporate veil is created by the sheer act of incorporation itself, in accordance with Companies Act.

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