Business Law Homework Help Critical Evaluation Examples: How to do Critical Evaluations in Law?
Critical Evaluation of principle of “Corporate veil”
Corporate
Veil is the legal concept that separates a corporation personality from
personalities of the company’s incorporators, shareholders or directors. This
has been created by the registration and incorporation of the company. This
metaphorical vein is very important as it protects the directors, the
shareholders of the company engaged in the activities, and being liable for
acts and regulations they are performing on behalf of the company. However, the
corporate veil can be brushed anytime by the court if there is an abuse in the
company’s legal personality. Therefore, there is no guarantee regarding the validity
of the corporate veil[i].
When a
company has its separate legal entity, it can only perform through its own
human agents involved and compose it as per our business law
homework help experts. Since any other human agents or artificial agents
cannot perform anything fraudulent or illegal, the pretence of the corporate
personality can be removed anytime to identify the responsible person for the
illegal behaviour. This act is called “lifting of corporate veil”[ii].
Lifting of
corporate veil is performed by the court in order to observe the status of real
state of affairs. However, the court and the legislature has in many cases
allowed the lifting of corporate veil, it is to be noted that the principles of
lifting of corporate veil falls under a rules and the instances such as lifting
or piercing the veil are exceptions to
the rule.
However,
there is no specific section where the definition of corporate veil has been
provided, but in Section 3(1) of
Companies Act, attempts have been made to provide a meaning to the word with
respect to the provisions provided and its implementation [iii].
It states that a company should be formed and must be registered under the act
as given in Section 3 (1) (i) or it
can be registered under an existing company under Section 3 (1) (ii) of this act. Based on the fact, a company has to
be registered otherwise it becomes illegal corporation[iv].
Lifting of
corporate veil also refers to a situation where the director or shareholder is
held responsible for company’s debt despite of having a rule of separate
personality and limited liability. The corporate veil doctrine is called on
when the incorporators or the shareholders smudge the distinction between the
corporation and its incorporators. As a result the company becomes liable in
corporate law through two ways that is: firstly through direct infringement or
direct liability and secondly the company becomes liable through secondary
liability[v].
According to
Staughton LJ’s critical analysis of piercing of corporate veil made in Atlas Maritime Co SA v Avalon Maritime Ltd,
which stated that the piercing of corporate veil is nothing but treating of the
activities or liabilities of the company as the activities of the company's
director or shareholder[vi].
On the other hand the piercing of corporate veil has also been demonstrated by Lord Neuberger in the Prest v Petrodel
Resources Ltd & Others which clearly states that piercing of the veil
is the bonafide exception to Salomon’s principles of corporate veil[vii].
This process of disobeying the corporate veil is known as piercing, lifting,
disregarding the corporate veil as per business law
online exam help experts. On the contrary, the piercing process of
corporate veil is yet to represent the specific legal terms or the doctrines
that are considered by the legal bodies regarding unethical separation of
liabilities. Rather, it establishes equal amount of responsibilities related to
guilt sharing by stakeholders of a company. Malaysia has passed a new Company
act 2016, under the 195 which talks about the empowerment of shareholders to
make decisions. Lawyers of different companies can be expected to object to any
kind of innovation. This might expose the clients to more liabilities[viii].
[i]
Peterson, Christopher W, ‘Piercing
the Corporate Veil by Tort Creditors.’ (2017) 13 J. Bus. & Tech. L. 63
[ii]
Anggusti, Martono, et al. ‘Corporate Governance for Employee's
Welfare.’ (2015) 3 Int'l J. Soc. Sci. Stud. 257
[iii]
Companies
Act 2016
<https://www.ssm.com.my/sites/default/files/companies_act_2016/aktabi_20160915_companiesact2016act777_0.pdf>
[iv]
Companies
Act 2016
<https://www.ssm.com.my/sites/default/files/companies_act_2016/aktabi_20160915_companiesact2016act777_0.pdf>
[v]
Vastardis, Anil Yilmaz, and Rachel
Chambers, ‘Overcoming the Corporate Veil Challenge: Could Investment Law
Inspire the Proposed Business and Human Rights Treaty? ’ (2017) 1 International
& Comparative Law Quarterly 35
[viii]
Cassel, Doug, ‘Outlining the Case
for a Common Law Duty of Care of Business to Exercise Human Rights Due
Diligence.’ (2016) 1.2 Business and Human Rights Journal 179
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