Piercing the corporate veil in various jurisdictions – Principled or unprincipled?

Abstract

The principle of limited liability of a company has been uniformly adopted by developed countries. In order to ensure a fair balance, the courts agree on occasion to ‘pierce’ or ‘lift’ the corporate veil, which involves imposing liability on the mother company for actions of its subsidiary or individual shareholders, directors, and other involved persons for actions of the company. In this regard, there have been several studies arguing the legal issues associated with the limited liability of a company and piercing the corporate veil such as Schall (2016) and Michoud (2019). This paper compares current veil-piercing practices in three jurisdictions: the UK, the US, and Australia in order to outline the advantages and limitations of the approaches taken by the courts in each country as well as to identify best practices in terms of veil piercing. For that purpose, an analytical approach to the examination of the relevant legal rules, principles, and court cases has been adopted in undertaking the present paper. The paper comes up with a number of specific suggestions and recommendations for improving the regulatory role in regard to the subject of piercing of the corporate veil.