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Corporate Veil Case Summary

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There are several cases in which the company allows the corporate veil to be lifted.
Firstly, the veil may be pierced in case of fraud or improper conduct. A common case where the veil was pierced due to fraud is that of the Gilford motor company. Mr. Horne was an ex-employee of The Gilford motor company and his employment contract provided that he could not solicit the customers of the company. In order to defeat this, he incorporated a limited company in his wife's name and solicited the customers of the company. The motive behind the company itself was to mast the owner’s fraud and it was regarded as a sham.
Moreover, separate legal entity is disregarded if it used for the purpose of tax evasion. Often, companies are created as a means …show more content…

Mr. Horne was a former managing director of the Gilford Co. His contract prevented him from competing against the co after leaving. He however, set up a company in the name of his avoid and solicited the customers of the company. The company acted against him and the court stated that because the company was formed to hide Mr. Horne illegal motives, the Co. was a sham.
In Daimler Co.Ltd V. Continental Tire and Rubber Co.Ltd, a company was formed in England so that tires manufactured in Germany by a German company could be sold in England. All the shareholders in Continental Tire and Rubber Co.Ltd except for one and all the directors were German residents. Continental Tyre and Rubber Co ltd supplied tyres to Daimler but the latter was reluctant to carry on with the trade as according to the law it was an offence to trade with the enemy.
Moreover, the law states that if a company is acting as agent for another party, the corporate veil may be lifted. The shareholders for whom the company is acting as agent will be responsible for the acts of the company. For example, F.G.Films LTD, an American company financed the production of a film in the name of a British company. 90 per cent of shares in the British company were held by the president of the American company. The Board of trade refused to register the film as a British one. This made sense as the British company was only acting on behalf of …show more content…

The Skipper Construction Company started construction on a plot for which the full price had not been paid to DDA and the space was sold to several people. The two sons of the directors who had business in their own names claimed that they had separated from the father and the companies they were running had nothing to do with the properties of their parents. But no satisfactory proof in support of their claim could be produced. This case is regarded as a sham because the director and members of his family had created several companies to hide their illegal activities. Thus the law allows the veil to be pierced and for the family to be treated a one

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