Tuesday 31 October 2017

UK: Judicial Committee of the Privy Council on piercing the corporate veil and 'one man' companies

Yesterday the Judicial Committee of the Privy Council delivered its judgment in Persad v Singh (Trinidad and Tobago) [2017] UKPC 32. At first instance, and upheld by the Court of Appeal in Trinidad and Tobago, the trial judge found that a director and shareholder of a company (CHTL) was liable for a lease granted to the company.

The Board took a very different view, with Lord Neuberger stating that "the facts of this case [do] not begin to justify piercing the veil of incorporation" (para. [16]) and proceeding to observe (para. [20]):
The fact that CHTL was a “one man company” is also irrelevant: see Salomon v A Salomon and Co Ltd [1897] AC 22, which famously established the difference between a company and its shareholders. That case also exposes the fallacy of the notion that the court can pierce the veil where the purpose of an individual interposing a company into a transaction was to enable the individual who owned or controlled the company to avoid personal liability. One of the reasons that an individual, either on their own or together with others, will take advantage of limited liability is to avoid personal liability if things go wrong, as Lord Herschell said [in Salomon] at pp 43 to 44. If such a factor justified piercing the veil of incorporation, it would make something of a mockery of limited liability both in principle and in practice."

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