Perhaps, the basis for the Court’s intervention in these exceptional circumstances is best summarized by the learned author of Revisiting The Alter Ego Exception In Corporate Veil Piercing 27 SAcLJ 177 Suffice to say, a very high threshold must be crossed before the Court would be willing to lift the corporate veil. This is commonly referred to as “lifting the corporate veil”. As such, in very exceptional circumstances, the Court will ignore the separate legal personality of a company and look to the shareholders / controllers of the company. The principle of the separate legal personality, however, is not immune from abuse.
The House of Lord’s decision was premised on the fact that a company is a creature of statute and, in law, therefore, the officers of a company and the company are separate persons. The concept of the separate legal personality was first laid down nearly a 120 years ago by the House of Lords in Salomon v Salomon & Co Ltd AC 22. Indeed, the biggest advantage of incorporating a company is precisely this concept of “limited liability”. If a company cannot pay its debts, it will be liquidated. In turn, a protective “veil” of sorts is cast over the true controllers of the company.Ĭonsequently, a company’s liabilities are its own, not those of its shareholders. The incorporation of a company creates a separate “person” in law.
Lifting the Veil of Incorporation Abuse of the Separate Legal Personality Separate Legal Personality
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