The two phrases “directing mind and will” and “piercing corporate veil” are related to each other as both the terms are using for identifying the separate legal entity of the company. Sometimes it has been observed that the directors of the company are misusing their power and made an excuse regarding the company’s structure. This report will discuss about the two topics to understand the real defence regarding the same.
Directing mind and will:
It is a no doubt to state that a company is a separate legal entity that is proved in the case of Salomon v. Salomon. It has been held that a company should not be held liable for the acts of any of its employee. However, this is also true that the company cannot perform its work by itself or without the help of the others.
The case related to directing mind and the conception was developed in the year 1944 in the case of DPP v Kent and Sussex Contractors Ltd, where the court was pleased to observe that the company can be held liable for any illegal act as all the acts of the company is regulated by the directors who have the knowledge regarding the outcome of it (Lipsitt 2013).
It was held in Lennard’s Carrying Co. Ltd v Asiatic Petroleum Co. Ltd, it was held that the Board of Directors of the company are the persons who are involving in the action relating to the directing mind and will (De Wet 2017).
There are certain acts that are not written under the constitution of the company but are related integrally to the functioning of the company. These actions are regulated by the board of directors and if there is any breach occurred regarding the same, the company will be held liable under the version of directing mind and will as held in Tesco Supermarket v Nattrass (1971) UKHL 1.
Piercing the corporate veil:
It is a well known principle of law that a company is a separate legal entity and therefore, for any kind of liability, the company cannot be held liable. It standardise the rights and liabilities of a corporation. In case of the common law country, there is leaning mentality regarding the corporate veil observed. However, in certain circumstances, these rules are pierced (Yadav 2017).
Suppose a company was held liable for certain fraud cases. When the affected party sue the company as a whole, they will held the company liable for the same. It is a fact that the company cannot perform their job alone and the directors and other shareholders of the company regulating the company. When the company is getting registered, a veil regarding the separate liability cropped up. When certain allegation made against the company, it will be the duty of the court to analyse the matter and replace the main culprit of the case by lifting the corporate veil (Flint 2016).
In Gilford Motor Co. Ltd v Horne, it has been observed that the corporate veil of the corporation can be uplifted where it is required regarding the appropriate cases.
Therefore, from the case, it has been held that the principle regarding the separate entity of the company can be upheld in certain situation. The main objective of this report is to find out the grounds where the director of the company shall be held liable for any illegal acts.
De Wet, M., 2017. Directing'The Absolute': towards destabilising the victim/perpetrator binary in Sam Shepard's A lie of the mind (1985) (Doctoral dissertation, University of Pretoria).
Flint, D., 2016. Incentives, Employers, and the Corporate Veil: Should Domestic Corporations Be More Accountable for the Actions of Their Overseas Subsidiaries?. Ariz. St. LJ, 48, p.833.
Lipsitt, L.P., 2013. impression of outside objects, whether agreeable or offensive; but the mind, possessed of a self-directing power, may turn its attention to whatever it thinks proper. It should, therefore, be employed in the most useful pursuits, not barely in contemplation but in such contemplation as may. Early Influences Shaping The Individual, 161, p.207.
Yadav, P.K., 2017. Lifting of Corporate Veil.