Lifting Corporate Veil Case Study

The term ‘Lifting the veil’ is corporate law’s most broadly used doctrine to decide when and how a person will be liable for obligations of the corporation. The doctrine does exist to check the principle that, shareholders should not be accountable for the wrongdoings or debt that someone else did of their corporation. In the first instance, is the company seen as a legal person entity. And when the court or the government feels that there is some wrongdoing, they will lift the veil to see the truth. One of the motifs for lifting of the corporate veil is fraud. The courts will lift the corporate veil when they feels that there is fraud.

There are 4 situations in which the veil will be lifted

 Attribution of some physical or mental state or character. This means that the court is trying to know the nationality of the person who control the company

 Use a company to commit fraud, or as a sham. In this situation the individual is not keeping her obligations. The mistake cannot be count on the company.

 Company is employed as an agent or its controllers. This means that a company’s can act as

The case is called ‘Gilford Motor Company Ltd v. Horne’. In this case was MR. Horne an employee of the ‘Gilford motor company’, where he became fired. He had an employment contract which he agreed to not solicit the costumers of the company where he has been working for years. In order to destruct this, he made a plan. The plan was that he did incorporate a limited company in his wife’s name. And of course, he solicited the costumers of the company. When the Gilford Company exposed this, they sued him. The Court of appeal: “the company was formed as a device in order to mask the effective carrying on of business of Mr. Horne. “In this case could we see, and it was obvious, that the primary aim of incorporating a new company was to invade fraud.” Therefore the court of appeal claimed it as a mere sham to mask his