Veil Of Incorporation Analysis Essay Example

but then transferred it to a company in an attempt to avoid specific performance. Since the company was owned and controlled by the defendant, the court ordered specific performance against both the company and the vendor. Another situation where lifting the corporate veil may occur is when a subsidiary is used by its parent corporation to carry out fraudulent transactions, with the intention of defrauding creditors, whether companies or individuals. This typically happens during the winding up of the subsidiary. An illustration of this can be found in 'Consolidated Sun Ray, Inc. v.Oppenstein,' where the court determined that an improper purpose was established through undercapitalization or asset removal from the subsidiary by the parent corporation – factors that influenced the court's decision on treating the subsidiary as an instrumentality."

"However, to summarize, the main point in most corporate veil lawsuits is that a corporation has been misused for an improper purpose, which allows for the corporate personality to be disregarded in the interest of fairness and justice. Generally, situations where the corporate veil may be lifted are classified as follows: 1.) Violation of public policy, meaning the breach of laws; 2.) Misrepresentation, as illustrated in the case of Jones vs. Lipman; 3."

The lack of economic substance is most clearly demonstrated in the case of Consolidated Sun Ray, Inc. v. Oppenstein, as well as through the participation in improper acts by shareholders, and the joint improper acts of sister companies.

Overall, although public policy typically supports protecting corporations, there are certain circumstances where fairness and equity require disregarding the corporate veil. While the court has determined some instances where this is necessary, it is important to note that

these are not the only situations that can lead to lifting the corporate veil. The most important factor is that lifting the veil serves the purpose of achieving justice and fairness. It is worth emphasizing that this action also helps ensure a fair investigation. Therefore, preserving and piercing the corporate veil should be approached with a careful balance to prevent injustice and promote equity.

Reference:1) H.

Ballantine, Corporations, (revised edition 1946) - http://www.krendl.com/CM/Publications/Piercing-Corporate-Veil.asp, Denver Law Journal, 1978, Volume 55, Number 1: Piercing The Corporate Veil: Focusing The Inquiry By Cathy S.

Krendl and James R. Krendl, Retrieved Nov. 24, 2006
3) Salomon v A.Salomon & Co. Ltd. (1897) AC 22
4) R.

Stevens, Handbook on the Law of Private Corporations, § 17 at 86 (1949) 5) https://www.nolo.com/definition.cfm, retrieved November 24, 2006 6) H.

Henn, Law of Corporations, 1, § 146 n. 2 (2d ed. 1970) 7) Companies Act of 1985 8) Consolidated Sun Ray, Inc. v. Oppenstein , (355 F.

2d 801 (8th Cir. 1964) 9) Fisher, S. J., Coffey, P.

S., Keeping the Veil: The National Law Journal, June 27, 2005, www.nlj.com. Retrieved Nov.

242006. 10) clemsweiss@hotmail. com, Corporate, Limited Liability And Lifting Ahe Veil Of Incorporation, by Clement Chigbo, retrieved Nov. 24, 2006