There are also case-related exceptions to Solomon`s principle, but their restrictive scope is not entirely stable. The current rule in English law states that only if a company was formed to commit fraud[13] or to circumvent a pre-existing obligation can its separate identity be ignored. This stems from the main case, Adams v. Cape Industries plc.[14] A group of employees suffered from asbestos after working for the wholly owned U.S. subsidiary of Cape Industries plc. They filed a lawsuit in New York to get Cape Industries plc to pay the subsidiary`s debts. Under conflict-of-laws principles, this could only happen if Cape Industries plc, through its U.S. subsidiary, were treated as “present” in America (i.e. ignoring the separate legal personality of the two companies). The Court of Appeal dismissed the action and followed the reasoning of Jones v. Lipman[15], stressing that the US subsidiary had been created for the legitimate purpose of creating a group structure abroad and was not intended to circumvent liability in the event of an asbestos dispute.
1. The expression “breaking the corporate veil” means contempt for the independent personality of a corporation and occurs when the court applies an exception to the rule in Saloman v. Saloman. The basis of this argument is that the company that was founded is a façade/deception to escape pre-existing legal obligations, and therefore the veil of the constitution should be lifted to reveal the true identity of the people responsible. This argument has proved more effective in previous case law. In some cases, attempts are made to establish the personal liability of the individual owners or controllers of a corporation for the liabilities, acts or omissions of the corporation itself. This is the first time that the highest court in the land has recognized the existence of a principle of English law that allows the courts to penetrate the corporate veil. This principle exists in very limited circumstances “where a person is subject to an existing legal obligation or liability or is subject to an existing legal restriction from which he knowingly evades or deliberately prevents its performance by involving an enterprise under his control”. The court may then lift the veil in order to deprive the company or its controller of the advantage they would have obtained by virtue of the autonomous legal personality of the company.
However, there have been several occasions when English judges or lawyers have referred to the concept of “penetration of the corporate veil” by the brief use of the Latin words “alter ego”. In a landmark decision, the Court of Appeal dismissed VTB`s appeal and upheld Justice Arnold`s trial judgment. The Court of Appeal confirmed the principle of legal separation between a company and its owners by expressly rejecting the idea that the breaking of the corporate veil would result in the puppeteer being considered responsible for the puppet`s contract. The Court held that English law already provided VTB with a remedy for the harm caused by the tort of deception and that the corporate veil could not simply be breached to alter a contractual claim, thus making the puppeteer and not the puppet liable for fraudulent contracts. The “corporate veil” metaphorically symbolizes the distinction between the corporation as a separate legal entity and the shareholders who own the shares of the corporation. The “lifting” or “breaking” of the corporate veil has the consequence that the shareholders, and not the company, are considered as the relevant actors to whom responsibility for the company`s obligations is imposed. b. The second is the “evasive principle.” The court may disregard the separate legal personality of a company if there is a legal action against the person controlling the company and if the company has deliberately intervened so that the separate legal personality of the company prevents the exercise of this right against the ruling party. The court may then break the veil of the company, but only to deprive the company or its controller of the advantage they would have obtained under the separate legal personality of the company. The concept of the “corporate veil” derives from the statutory provisions of the respective companies statutes of the jurisdictions (which expressly provide for the limited liability of shareholders of limited liability companies in shares) and the landmark decision of the English House of Lords in Salomon v. A Salomon and Co Ltd [1897] AC 22, which established the legal separation between a company and its shareholders.
This article summarizes the principles according to which, in light of recent jurisprudence, a court can break the corporate veil in the event of fraud. However, Lord Sumption acknowledged that in some of the cases where fraud or a dishonest scheme was allegedly committed by using a corporation to conceal the identity of dishonest offenders (sometimes leading to the use of “multi-level terms” such as “façade” or “appearance”), a separate principle was applied. which he described as the “principle of obfuscation”: “The principle of obfuscation is legally banal and does not involve piercing the corporate veil at all. The fact is that the involvement of one or perhaps several companies to conceal the identity of real actors will not prevent courts from identifying them, provided their identity is legally relevant. In these cases, the court does not neglect the “façade”, but only looks behind it in order to discover the facts that obscure the structure of the company. These circumstances usually require clear evidence of fraud and dishonest evasion of pre-existing responsibilities through abuse or abuse of the corporate structure. According to Lord Halsbury LC in Salomon, a limited liability company was to be regarded as “any other independent person having its own rights and responsibilities”. In other words, a Bermuda company, a British Virgin Islands company and a Cayman Islands company each have separate and independent legal personality as shareholders.