Director's Protection - Company Formation - UK Registration Services

Lifting the company veil

Lifting, or breaking through the company veil is another category of substantive restriction rates. It is unusual in the context of core company law in the UK for statutory lifting of the company veil in the situations of employment law, tax law and competition law.

Courts are more inclined to allow creditors to reach the assets of shareholders where limited liability provides minimal gains from improved liquidity and diversification, while creating a high probability that a firm will engage in a socially excessive level of risk taking. It is thus predicted that the piercing of the veil by the courts is more likely in situations of: closed or small companies as opposed to publicly held ones; groups with company shareholders as opposed to individual shareholders; involuntary creditors; and in situations where companies are under funded.

The United States, Australia and the United Kingdom were testing grounds for this forecast. It was found that situations relating to lifting the veil were more concerned with closed companies and yielded more likelihood of a lifting when the number of members in the company is low.

The single owner managed company was the principal target. It was also found that the courts were less likely to lift the veil on situations relating involuntary creditors, and later found in situations from United States and Australia that tort victims were more likely to have the veil lifted in their favour.

In a research conducted on just under 300 situations in the United Kingdom, It was found that courts lifted the veil on just under half the situations, with situations relating tax, criminal liability, breach of fiduciary duty to have the veil lifted in their favour more often than tort situations. The lifting of the veil was also more likely to come about as a request from government than by request of the shareholders.

In situations where the owner was a parent company or governmental body, or in situations of multiple and passive shareholders, lifting rates were below average. Situations where the veil was to be lifted so as to fix the shareholders of a public company with personal liability are non-existent.

The predictions of economic theory do not work in relation to these findings. They do bear the suggestion that the majority of situations of lifting the veil would involve closed companies, there is no forecast supported to say that courts would be more likely to lift the veil in situations regarding involuntary creditors and company group structures.

It is important to note the limitations of these situations.

1. Forming A Company Just Became Easier

2. Statutory Requirements For New Companies

• Issue and Allotment of Shares
• Transfer of Shares
• Dividends
• Company Meetings
• Company Notices
• Directors Meetings
• Single Member Companies

3. Non Profit Organisations

• Options for incorporated not-for-profit organisations
• Companies House Coding System
• Non s30 companies
• Royal Charter
• Charitable Companies

4. Company Directors and Secretaries

• An introduction to limited companies
• Role and duties of a company director
• Role and duties of a company secretary
• What you have to send to Companies House
• Quality of company documents
• Further information

5. Annual Returns

• Completing an annual return
• Completing the shuttle annual return Form 363s

6. Accounts and Accounting Reference Dates

• Accounting reference dates
• Submitting accounts to Companies House
• What if the accounts are delivered late?
• Small and medium sized companies accounts submission
• Very small company audit exemptions
• Audit exemptions and accounts to shareholders
• Exemption from audits for dormant companies
• What happens if my company starts trading again?
• Partnership accounts

7. Company Auditors

• Appointment of auditors
• Dormant company audit exemption
• What and who are recognised supervisory bodies?
• Removal of auditors

8. Share Capital and Prospectuses

• Share capital
• What is issued capital?
• Non-cash payments?
• Are there different types of shares?
• Can class rights be amended?
• Redemption and purchase of own shares?
• Prospectuses and listing particulars

9. Late Filing Penalties

• Late filing penalties
• Late filing penalties need not be necessary
• Once a late filing penalty has been imposed
• Further information

10. The Costs and Benefits of Company Registration

• Company Formation Introduction
• Costs and benefits of limited liability
• Restrictions and costs of setting up a company I
• Restrictions and costs of setting up a company II
• Restrictions and costs of setting up a company III
• Restrictions and costs of setting up a company IV
• The registration of company names
• The company’s constitution and the ultra vires rule
• Summary and conclusions