Judicial Consistency in Veil Piercing Cases Involving Fraud and Evasion in the UK: Analysing the criticisms in applying veil-piercing in the parent and subsidiary companies.

Abstract

This dissertation examines the judicial approach to piercing the corporate veil in cases where a parent company establishes its subsidiary to commit fraud or evade obligations under the Companies Act 2006 in the UK. Additionally, it evaluates the criticisms from academic perspectives and interprets the arguments of judges regarding the application of this principle. The application of this principle has been controversial in that company law appears to ignore the separate legal personality. The abuses of the legal personality of the company could be addressed by holding those responsible for the violation accountable rather than piercing the corporate veil, which might result in compromising the importance of Salomon’s principles. Nevertheless, the UK courts have appeared somewhat confused about the circumstances to pierce the corporate veil. In the case of Prest v Petrodel Resources Ltd, the Supreme Court established several principles of concealment and evasion of obligations and clarified them. Thereafter, the criticisms have been directed at the principle of piercing the corporate veil due to a lack of coherence and consistency in its application. As a result, these confusions regarding applying the veil-piercing doctrine might undermine the significance of the principles of separate legal personality and limited liability. Furthermore, it could lead to several consequences, such as economic impacts on shareholders. However, traditional remedies, such as tort law, contract law, or insolvency law, might be more appropriate in these situations against perpetrators of violations. This approach would help maintain the separate legal personality of the company.