Since the Salomon case, the doctrine of separate corporate personalities constitutes the corner stone of British company law. Thus, a properly incorporated company is considered as having a legal personality of its own and ought to be treated as a legal entity distinct from its shareholders even if in reality they operate its business and control its activities. The Salomon doctrine also applies in the case of "groups" of holding and subsidiary companies. This means that each company in the group has a separate legal personality; thus, a parent company won't in theory, be held liable for the debts of its subsidiary. For Sealy, the authority of Salomon "is unshakeable; and yet exceptionally in some instances the law is prepared to disregard or look behind the corporate personality and (it is claimed) have regard to the ?realities' of the situation". In other words, the judiciary are sometimes invited to "pierce the corporate veil" in order to prevent decisions that might be regarded as unjust, particularly where groups of companies are involved. However, it will be argued that even though the courts have in some specific cases decided to lift the veil of incorporation, it appears that such situations were exceptional. When groups of companies are concerned, the judiciary are wise to show themselves cautious and reluctant to pierce the corporate veil.
[...] Gower and Davies, Principles of Modern Company Law, London: Sweet & Maxwell p [1996] 2 All E.R Court of Appeal Davies, P. Gower and Davies, Principles of Modern Company Law, London: Sweet & Maxwell p [1990] B.C.C Davies, P. Gower and Davies, Principles of Modern Company Law, London: Sweet & Maxwell p. 202-6 [1998] 2 B.C.L.C Court of Appeal Trustor AB v. Smallbone [2001] 1 W.L.R Sealy, L.S. Cases and Materials in Company Law, 7th edn, London: Butterworths p Davies, P. Gower and Davies, Principles of Modern Company Law, London: Sweet & Maxwell p. 208-9 Atlas Maritime Co SA v. [...]
[...] “A temple built on faulty foundations: piercing the corporate veil and the legacy of Salomon v. Salomon”, Journal of Business Law Mar, p. 181-2 DHN Ltd v. Tower Hamlets London Borough Council [1976] 1 W.L.R Birds J. & Boyle A.J. Boyle and Birds' Company Law, 6th edn, Bristol: Jordans p Rixon, F.G. “Lifting the Veil Between holding and subsidiary companies”, Law Quarterly Review p Sealy, L.S. Cases and Materials in Company Law, 7th edn, London: Butterworths p [1978] S.L.T Birds J. [...]
[...] Avalon Maritime Ltd, The Coral Rose [1991] 4 All E.R Davies, P. Gower and Davies, Principles of Modern Company Law, London: Sweet & Maxwell p. [...]
[...] As Davies states, “even where the case for applying the doctrine may seem strong, as in the undercapitalized one-person company, which may or may not be part of a larger corporate group, the courts are unlikely to do so”.[28] When groups of companies are concerned, the judiciary prefer to exercise caution and thus to constantly reassert the importance of corporate personality. In Atlas Maritime Co SA v. Avalon Maritime Ltd[29], Staughton LJ even observed that although a situation when a subsidiary is controlled by its parent and when it operates with the parent's funds without exposing the parent to liability doesn't reflect “the most honest way of trading”, it remains that it is quite a common way of carrying on a business. [...]
[...] 415-23 Salomon v. Salomon & Co. Ltd. [1897] A.C House of Lords Moore, M. “A temple built on faulty foundations: piercing the corporate veil and the legacy of Salomon v. Salomon”, Journal of Business Law Mar, p Sealy, L.S. Cases and Materials in Company Law, 7th edn, London: Butterworths p Birds J. & Boyle A.J. Boyle and Birds' Company Law, 6th edn, Bristol: Jordans p. [...]
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