The claimant made an application to amend its particulars of claim to incorporate a contractual claim and argued that the corporate veil should be pierced so that the defendants could be held jointly and severally liable with the borrower on the basis that they controlled the actions of the borrower and they had used the borrower as a device to conceal their impropriety.
The Court of Appeal decided that it would be contrary to principle and authority and therefore not appropriate to pierce the corporate veil to effect a contractual claim from the claimant against those alleged to be controlling the defendant companies, where those being pursued were not a party to that contract.
Caterpillar Financial Services UK Limited the Claimant advanced loans to the first and second defendant companies for the purpose of the acquisition and construction of two yachts. The first and second defendants defaulted under the loan agreements. The Claimant made demands on the first and second defendants and subsequently terminated the loan agreements. Demands were also made on each of the guarantors of the loans, the third to ninth defendants.
The defendants are, for the most part, connected to the first and second defendant companies, as well as to the third defendant who is the controlling mind of all corporate defendants and also one of the guarantors. The fourth defendant company entered into a guarantee and indemnity in favour of the Claimant in respect of the loans advanced. The fifth, sixth and seventh defendant companies, each provided guarantees or security to the Claimant in respect of the loans.
The eighth and ninth defendants, individuals, both provided guarantees in respect of the loan to the second defendant. The tenth to sixteenth defendants are alter ego corporate vehicles of the third defendant, who directs and controls the actions of the companies. The Claimant obtained a judgment against the third defendant the Guarantor , in the hope that it could be enforced against a residential property the Property declared by the Guarantor as one of his assets prior to the loan being advanced.
Throughout the proceedings the Guarantor had asserted that the Property was owned by the fourteenth defendant the Company and that he had no beneficial interest in it. In Alaska, courts use two tests to determine whether a court may pierce the vail:. Nevada uses a three-part test to determine whether a court may pierce the corporate veil:. In New York, Walkovsky v. Carlton is a leading case on piercing the corporate veil. The court in that case held that a plaintiff needs to prove that a shareholder used the corporation as his agent to conduct business in an individual capacity.
The courts are very cautious to hold business owners or shareholders liable for the debts of their business. As such, proof will need to be provided that shows your company has pierced the corporate veil. Innocent parties that were not part of the fraudulent activities or wrongful acts are not held liable. Public companies, for instance, that pierce the corporate veil will not have all shareholders held liable for the debts incurred.
Instead, only those that were responsible for the activities that pierced the veil will lose their legal separation of the business and their own personal assets. Once the veil has been pierced, any responsible parties can have their personal assets taken from them to reimburse creditors or to satisfy any judgments a lawsuit may bring.
Piercing the veil is a serious matter that will require the assistance of a lawyer. To avoid trouble, it's best to play it safe. It's important for small corporations and LLCs to comply with the rules governing formation and maintenance of a corporation, including:.
Commingling assets. Small business owners may be more likely than their larger counterparts to commingle their personal assets with those of the corporation or LLC.
For example, some small business owners divert corporate assets for their own personal use by writing a check from the company account to make a payment on a personal mortgage -- or by depositing a check made payable to the corporation into the owner's personal bank account.
This is called "commingling of assets. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service.
0コメント