Re-evaluating the corporate veil
In 1985, American scholars Frank Easterbrook and Daniel Fischel described the doctrine of “piercing the corporate veil” as “rare, severe, unprincipled and confused”. English law is now considerably clearer following the Supreme Court’s decision in Prest v Petrodel Resources Ltd. However, clarity does not necessarily mean fairness. The doctrine remains exceptionally narrow. This creates difficulties where multinational corporate groups use separate subsidiaries to isolate risk, leaving creditors unable to recover from a better-resourced parent company. The starting point: separate corporate personality The modern law begins with Salomon v A Salomon & Co Ltd. The House of Lords held that a properly incorporated company has a legal personality separate from its shareholders. Even where one shareholder effectively controls the entire business, the company’s debts remain its own. This principle underpins limited liability. Shareholders are generally not required to contribute towar...
