Corporate Veil Essay

576 Words3 Pages
a. Why corporate veil should not be lifted. 1. New Horizons v union of India. 2. Single economic Unit Rationale: Adams v. Cape Industries, which rejected the ‘single economic entity’ rationale expressly, but rejected the agency arguments only on the grounds that an agency was not established in the facts of the case. Thus, the position arising from Adams is that a group of companies cannot be treated as one on the sole ground that the companies are part of the same economic group. However, if it can be established that a company habitually acts according to the wishes of one shareholder, then a factual agency can very well be established. This would allow the Courts to lift the corporate veil.----- 3. A ‘single economic entity’ argument is based on the fact that two or more companies are part of one economic group, while a ‘factual agency’ argument is based on the degree of control over a company by another (legal or natural) person. Rejection of one argument does not mean rejection of the other. 4. Hashem v. Shayif- It appears from the judgment that the only case in which the corporate veil could be lifted was where the company was a façade. In order to support this conclusion, Justice Munby relied on several cases, but most prominently on the decision of the Court of Appeals in Adams v. Cape Industries plc., and on an observation by Lord Keith in the House of Lords decision in Woolfson v. Strathclyde Regional Council that “it is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere façade concealing the true facts.” 5. In opp to point 6: Azadi Bachao Andolan is often understood as restricting the application of “substance over form” doctrines. This might mean that Courts will tend to be less open to lifting the veil on assessments of hypothetical motive. b. Why in this case particularly it should not be
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