PREST v. PETRODEL - THE WAY FORWARD FOR VEIL PIERCING? by Kang Su-Lin
A foundational principle of company law is that an incorporated company is seen as a legal entity on its own, distinct from its members. This principle, known as the doctrine of separate corporate personality, was established in the United Kingdom (UK) case of Salomon v. Salomon1, and codified in Section 19(5) of the Companies Act in Singapore. With the principle’s roots in Joint Stock Companies, the rule in Salomon has arguably come a full circle, now being most commonly applied to the modern large private company. While this does fulfil its original purpose of protecting shareholders and thus allowing business risks to be taken, this doctrine may be misused and cause manifest injustice. Thus, in some exceptional cases, courts have been willing
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Salomon v. Salomon [1896] UKHL 1
to disregard separate corporate personality and pierce the corporate veil, so that ‘a wrongdoer cannot benefit from his dishonest misuse of a corporate structure for improper purposes”.2. However, the grounds for veil piercing are far from clear. Acknowledged by the courts that the cases surrounding veil piercing are characterised by “incautious data” and “inadequate reasoning”3, many have questioned whether there really is such a doctrine4. These criticisms apply both
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Prest v. Petrodel Resources Ltd [2012] EWCA Civ. 1395 Prest v. Petrodel Resources Ltd [2013] UKSC 34 [19] VTB Capital Plc v. Nutritek [2013] 1 BCLC 179, [117-118