Piercing the Corporate Veil Doctrine under English Company Law after Prest v Petrodel Decision

Allerhand Working Papers

21 Pages Posted: 8 May 2017 Last revised: 8 May 2018

See all articles by Ariel Mucha

Ariel Mucha

Jagiellonian University, Krakow; Allerhand Institute; Pedagogical University of Cracow

Date Written: August 31, 2017

Abstract

The Supreme Court case Prest v Petrodel Resources Ltd [2013] 2 AC 415 addresses the issue of whether, and if so in what way, the court is competent to pierce the corporate veil save any specific statutory authority to do so. In this context, Lord Sumption sheds further light on the doctrine of abuse of corporate personality under English law. Foremost, he draws a distinction between the evasion and concealment situations. The first involves situation, in which the person sets up the company with the aim of avoiding the prior obligation incumbent upon him or her. The second occurs when the relevant identity of “real actors” is hidden behind the corporate veil. In the Lord Sumption’s opinion, only evasion may justify the application of the piercing the corporate veil doctrine. This article aims to find the rationale behind introduction of evasion and concealment principle, which seems to be the restriction of the piercing the corporate doctrine to the point where it will have no practical meaning for future cases.The Supreme Court case Prest v Petrodel Resources Ltd [2013] 2 AC 415 addresses the issue of whether, and if so in what way, the court is competent to pierce the corporate veil save any specific statutory authority to do so. In this context, Sumption LJ sheds further light on the doctrine of abuse of the company personality under English law. Foremost, he draws a blurred line between the concept of the piercing and lifting corporate veil. The intended strong limitation of the exception to the strict approach articulated in Salomon v A Salomon & Co Ltd [1897] A.C. 22 – separation of legal person from its shareholders and no prospects to make shareholder a party to the agreement concluded by the company – seems to be a failure yielding more doubts than providing a clearly articulated legal framework. This article argues against this approach and it suggests that the piercing veil doctrine needs to be forgotten once and for all.

Keywords: Prest, piercing corporate veil, lifting corporate veil, english company law

JEL Classification: K22, K29

Suggested Citation

Mucha, Ariel, Piercing the Corporate Veil Doctrine under English Company Law after Prest v Petrodel Decision (August 31, 2017). Allerhand Working Papers, Available at SSRN: https://ssrn.com/abstract=2962934 or http://dx.doi.org/10.2139/ssrn.2962934

Ariel Mucha (Contact Author)

Jagiellonian University, Krakow ( email )

Collegium Novum
ul. Gołębia 24
Krakow, 31-007
Poland

Allerhand Institute ( email )

Plac Sikorskiego 2/7
Kraków, 31-115
Poland

Pedagogical University of Cracow ( email )

Podchorążych 2
Cracow, małopolska 30-084
Poland

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