lifting the veil

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The act of disregarding the veil of incorporation that separates the personality of a corporation from the personalities of its members and directors. This exceptional course is occasionally sanctioned by statute, for example in relation to wrongful trading or fraudulent trading, when it may result in members or directors of a limited company incurring liability. It is also employed by the courts, for example if incorporation has been used to perpetrate fraud or gives rise to unreal distinctions between a company and its subsidiary companies (Gilford Motor Co Ltd v Horne [1933] Ch 935; Jones v Lipman [1962] 1 WLR 832; Trustor AB v Smallbone (No 2) [2001] WLR 1177 (Ch), but never so as to defeat limited liability (Ord v Belhaven Pubs Ltd [1998] 2 BCLC 447; Adams v Cape Industries plc [1990] Ch 433). Very occasionally the courts openly disregard corporate personality but more often they evade its inconvenient consequences by deciding that the acts were performed by the corporation acting as agent or trustee for the company members, to whom therefore they should be attributed (Smith, Stone & Knight Ltd v Birmingham Corporation [1939] 4 All ER 116).

Subjects: Law.

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