Piercing the Corporate Veil? A critical analysis on Prest v Petrodel Resources Ltd and Others

Author:Ko Tsun Kiu - Lam Wan Shu
Position:Final-year LL.B students at the City University of Hong Kong. The authors would like to thank the Editorial Board and the peer reviewer for their assistance in this paper. Usual caveats apply.
Pages:1-8
1
Dundee Student Law Review, Vol. 5(1+2), No.3
Piercing the Corporate Veil? A critical analysis on Prest v
Petrodel Resources Ltd and Others
Ko Tsun Kiu and Lam Wan Shu
Abstract
Ever since the early development of company law, the notion of corporate veil has been one of the most
fundamental legal principles. From Aron Saloman v A Saloman & Co Limited [1897] AC 22, it has long been
established that cour ts recognise the separate legal entity of a company. However, in order to prevent misuse
of the corpor ate form, the notion of veil-piercing was developed. In 2013, the United Kingdom Supreme Court
handed down a seminal judgment on the law of corporate veil, Prest v P etrodel Resources Ltd and Others
[2013] UKSC 34, in which Lord Sumption proposed the evasion and concealment principles. By classifying
veil-piercing as evasion, his Lordship suggested that concealment cases were not truly veil-piercing. It was
also held that the corporate veil could only be pierced where there was no available alternative remedy. As a
result, the notion of veil-piercing has been significantly narrowed. On the other hand, Lord Walker in the
same judgment disagreed with Lord Sumption’s formulation, suggesting that veil-piercing was just a label
and not a doctrine. This paper is in agreement with Lord Walker’s observation that the notion of veil-piercing
is not a doctrine but a label. This work is developed from a previous work of the authors. We would like to
acknowledge Ms. Ho Ho Chun and Ms. Marta Gonzalez Ruano Calles for their contributions to the previous
work.
Introduction
In Aron Saloman v A Saloman & Co Limited (Saloman),1 it was held that a company and the individuals
behind it would enjoy separate legal personalities.2 However, there are circumstances where the court can
pierce the corporate veil to impose liability on the individuals behind the company, such as directors and
shareholders.3 In Prest v Petrodel Resources Ltd and others (Prest),4 Lord Sumption, Lady Hale, Lord Wilson
and Lord Mance described ‘veil-piercing’ as a ‘well-established’ principle,5 while Lord Neuberger and Lord
Final-year LL.B students at the City University of Hong Kong. The authors wo uld like to thank the Editorial Board and the peer
reviewer for their assistance in this paper. Usual caveats apply.
2 ibid 51.
3 Stefan Lo and Charles Qu, Law of Companies in Hong Kong (3rd edn, Sweet & Maxwell 2018) 119.
4 Prest v Petr odel Resources Ltd and others [2013] UKSC 34.
5 ibid [27], [89], [99].

To continue reading

Request your trial