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Topic 4 - The company as a corporate entity
Company Law (2106AFE)
Griffith University
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TOPIC 4
A COMPANY AS A CORPORATE ENTITY
EFFECT OF REGISTRATION OF THE COMPANY
Why incorporate or form a company?
The reasons for and against the incorporation of a business into a company are varied. Section 112 of the Corporations Act lists the types of companies that can be registered under that Act. Those companies are as follows:
proprietary companies - limited by shares or unlimited with share capital;
public companies - limited by shares; limited by guarantee; unlimited with share capital; or no liability companies. With respect to no liability companies, note section 112(2), (3) and (4) and the need for the relevant constitution requiring that the sole object of the company be for “mining purposes” (defined in section 9).
With respect to proprietary companies, note section 113 of the Corporations Act.
One of the most important prohibitions contained in the Corporations Act in this regard is set out in section 115. That section precludes a person from participating in the formation of a partnership or association that has an object gain for itself or for any of its members; and has more than 20 members unless the partnership or association is incorporated under an Australian law.
Note the prohibition in section 116 of the Corporations Act.
Steps in registering a company
You should note Part 2A of the Corporations Act beginning at section 117. Once an application is lodged under section 117 ASIC may give the company an ACN and register the company and issue a certificate setting out the matters contained in section 118(1)(c). ASIC must keep a record of the registration.
In relation to names note Part 2B of the Corporations Act beginning at
section 147. However, note the need for a company to exhibit its name: section 144. In particular, note the need to have “Limited”, “No liability” or “Proprietary” as part of the name: (section 156) unless sections 150 or 151 apply. In relation to change its name to see section 157 and 157A.
A company comes into existence on registration: section 119.
With respective jurisdiction of registration note section 119A.
A company must have at least one member: section 114. A person becomes a member, director or company secretary on registration if the person is specified in the application with their consent: section 120. Note also sections 121 and 122 dealing with registered office and expenses in promoting and setting up the company. Finally, a company may have a common seal (section 123) and this aspect is important when dealing with the application of sections 127 and 129 which is covered in Topic 8 in this course.
Advantages of registration
Registration of a company brings with it a number of advantages. Some of these are:
(a) Separate legal personality
Upon incorporation the company becomes a new and independent legal entity. It is completely separate from the subscribers who formed it and from those who manage it. A creditor can generally only sue the company, not its members, to recover damages. However exceptions exist to this latter point and these are outlined later in this Topic.
(b) Limited liability
If the company is one limited by shares (defined in section 1070A), then section 516 of the Corporations Act provides that a member's liability is limited to the amount unpaid, if any, on these shares. This can be contrasted with a partnership where there is, except for limited liability partnerships, unlimited liability and therefore all the assets of a partner are vulnerable in the event of default by another partner. The extent of a member's liability depends on the type of company as provided in section 112 of the Corporations Act.
It should be noted that limited liability applies only to members. A company does not enjoy limited liability in its dealings with outsiders.
A company being a separate legal entity can own property. This property is not owned by the members as they only own shares in the company. In Macaura v Northern Assurance Co Ltd [1925] AC 619, Macaura owned a timber yard. He had an effective insurance policy to cover the destruction of any timber by fire. He subsequently formed a limited company in which he was a substantial shareholder and assigned the timber to the company, the purchase money for the timber remaining owing to him. He did not assign the insurance policy to the company, nor did the company take out its own policy. A fire destroyed the timber.
The insurance company's refusal to pay the claim made by Macaura was upheld by the court. The limited company, considered by law to be a legal entity separate to its shareholders, had an insurable interest in the timber but had no policy. Macaura had a policy, but he had no insurable interest in the timber: all he had was a debt owing to him by the company 2.
Also changes in membership of the company have no effect on the ownership of the company's assets.
(h) Capability of suing and being sued
As a company is a separate legal entity it may sue to enforce rights and it may be sued by others. Importantly, members in some instances may sue on behalf of the company. This latter aspect will be dealt with in Topic 7 under the headings, “Members Remedies” and “Derivative Actions”.
(i) Privilege against self-incrimination
Historically courts have preceded on the basis that a corporation could claim privilege against self-incrimination. This was clearly an advantage. However since the recent decision in Environment Protection Authority v Caltex Refining Co Pty Ltd (1994) 68 ALJR 127 this position is no longer clear. In this case Caltex was the holder of a licence under the State Pollution Control Commission Act 1970 (NSW) to discharge waste into the ocean. The Environmental Protection Authority prosecuted Caltex for discharging oil and grease into the ocean in breach of its licence. The Authority subsequently served Caltex with a notice under the Clean Waters
2 Now sections 16 and 17 of the Insurance Contracts Act 1984 (Cth)
require only that the claimant suffer a "pecuniary or financial loss" through the destruction of, or damage to, the insured property. So long as this interest exists as at the date of the loss, the claimant is not barred from claiming on the policy by reason only of not having a legal or equitable interest in the property. It thus seems that if the circumstances of Macaura's case were repeated today, the claimant would be successful.
Act 1970 (NSW), sec 29(2)(a) requiring it to produce certain documents relating to its discharge of waste. Caltex objected to the validity of the notice and the Authority then issued a notice to produce under the Land and Environment Court Rules 1980 (NSW).
Caltex sought to have the notices set aside on the basis that a production could incriminate them. The trial judge held that the privilege against self incrimination did not apply to corporations but the New South Wales Court of appeal allowed the appeal. The High Court held however, by majority, that the privilege was not available to corporations.
- Disadvantages of registration
As opposed to these advantages in incorporating a company, there are a certain number of disadvantages. For example:-
(a) Limitations on shareholders bringing proceedings on behalf of the company
There are procedural difficulties for shareholders to bring a court action on their own behalf and on behalf of their company. Historically, the so-called rule in Foss v Harbottle [1843] 2 Hare 461 was illustrative of such a problem. In that case two shareholders brought an action on behalf of themselves and all other shareholders against the directors, solicitor and architect of their company. They alleged that the defendants had fraudulently misapplied company property and that the board was not properly constituted. The defendant's argued that the plaintiff's plea, even if proved, did not entitle them to succeed.
The Court held that the injury of which the plaintiff's complained of was not an injury to themselves but to the company. Therefore the company should sue in its own name. According to Wigram VC:
"It was not, nor could it successfully be, argued that it was a matter of course for any individual members of a corporation thus to assume to themselves the right of suing in the name of the corporation. In law the corporation and the aggregate members of the corporation are not the same thing for purposes like this; and the only question can be whether the facts alleged in this case justify a departure from the rule which, prima facie, would require that the corporation should sue in its own name and in its corporate character, or in the name of someone whom the law has appointed to be its representative."
Now this area is governed by section 236 – 242 of the Corporations Act which is covered in Topic 7 under the headings, “Members Remedies” and
can have limited liability. Separate legal personality was firmly established in Salomon v A. Salomon & Co Ltd [1897] AC 22. Salomon had traded on his own as a leather merchant and shoe manufacturer for over thirty years. While his business was solvent he formed a company called "Aron Salomon and Company Limited" and sold his business to this company. The Companies Act 1862 (UK) required seven subscribers and Salomon, his wife and five children each subscribed one share to satisfy the statute.
Salomon valued his business at 39,000 pounds which appeared to be an inflated figure. However instead of taking cash for the sale of the business, Salomon took 20,000 fully paid one pound shares in addition to debentures to the value of 10,000 pounds. These debentures were secured by a floating charge. The balance of the purchase price remained as an unsecured debt.
Soon after the company came into financial difficulties and needed an injection of funds. In response, Salomon borrowed 5000 pounds from Broderip which he advanced to the company. To obtain this loan, Salomon had his debentures cancelled and reissued to Broderip, but on terms that he should obtain a residual benefit after the debt was discharged.
Payments to Broderip fell into arrears and Broderip enforced his security. The company's liquidation followed. After Broderip was paid, there remained a balance of indebtedness secured by the debentures. Salomon claimed his reversionary entitlement. However if this claim was satisfied there would be no funds left to pay out the other unsecured creditors. The liquidator attempted to resist the claim by arguing that the debentures were invalid on the ground of fraud.
At first instance, Vaughan Williams J 4 , held that the company was merely acting as Salomon's nominee and agent and therefore Salomon as principal had to indemnify the company's creditors personally. On appeal, the Court of Appeal in rejecting Salomon's appeal, held that Salomon was a trustee for the company which was his mere shadow.
Salomon appealed to the House of Lords which rejected the lower courts' rulings. According to Lord MacNaghten 5 :
"The company is at law a different person altogether from the subscribers to the Memorandum and, although it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or
4 [1895] 2 Ch 323.
5 [1897] AC 22 at 51.
trustee for them. Nor are subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act. That is, I think, the declared intention of the enactment".
Lord Watson emphasised 6 that the creditors of the company could have searched the Companies Register to ascertain the names of the shareholders and the number of shares which they held. However the failure to do this should not impute a charge of fraud against Salomon.
Lord Herschell 7 looked at the intention of the statute in that it sought to protect shareholders by limiting their liability.
Lord Halsbury LC had a similar view. According to his Lordship there was no right to add to the requirements of the statute, nor to take from the requirements which had been enacted. "The sole guide must be the statute itself." Once a person was a shareholder they were shareholders for all purposes and the statute was silent as to the extent or degree of interest which had to be held by the individual corporators.
Importantly Lord Halsbury added an important qualifier to the immutability of the separate legal entity doctrine. His Lordship said;
"I am simply here dealing with the provisions of the statute, and it seems to me to be essential to the artificial creation that the law should recognise only that artificial existence - quite apart from the motives or conduct of individual corporators. In saying this, I do not at all mean to suggest that if it could be established that this provision of the statute to which I am adverting had not been complied with, you could not go behind the certificate of incorporation to show that a fraud had been committed upon the officer entrusted with the duty of giving the certificate and that by some proceeding in the nature of scire facias you could not prove the fact that the company had no legal existence. But short of such proof it seems to me impossible to dispute that once the company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself and that the motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are..."
From this judgment by the House of Lords the concept of "a company" was seen as a legal entity in its own right. The very heart of separation and independence from those involved in the company's management and structure was established as a result of Salomon's case. If creditors dealt
6 [1897] AC 22 at 40.
7 [1897] AC 22 at 45.
view it is a logical consequence of the decision in Salomon's case that one person may function in dual capacities."
In Industrial Equity v Blackburn (1977) 52 ALJR 89, the High Court refused to treat a subsidiary company as merely part of its holding company for the purposes of determining the profits of the holding company because of the separate legal entity concept. In this case the question arose "whether in ascertaining the amount of profits available for distribution by a holding company by way of dividend, it is correct to look at the profit of the holding company itself or to the group profit as disclosed by the consolidated accounts." The court held that it was correct to do this. According to Mason J:
"However, it can scarcely be contended that the provisions of the Act operate to deny the separate legal personality of each company in a group. Thus, in the absence of contract creating some additional right, the creditors of company A, a subsidiary company within a group, can look only to that company for payment of their debts. They cannot look to company B, the holding company, for payment."
It should be noted that the provisions contained in sec 588V-588X of the Corporations Law allows a liquidator to recover compensation from a holding company where its subsidiary has been involved in insolvent trading. This is discussed later in this Topic.
MITIGATING THE RIGOUR OF THE SEPARATE LEGAL ENTITY
DOCTRINE
Once it was acknowledged that a company enjoyed a separate and legal existence apart from its members, another consideration needed to be dealt with, namely the rights of creditors. The fact that many companies were incorporated with limited liability further entrenched the notion that creditor's rights were limited. If creditors dealt with this separate legal entity in which members had limited liability, then any recourse which they may have had would be to the company itself. Thus the separate legal entity doctrine was a two-edged sword. On the one side the rights of members were limited and on the other side, a creditor practical ability to seek redress was limited. Courts and the legislature then had to balance these respective rights to prevent abuse. A starting point to analysing the quest for a balance can be found by examining the chequered history of limited liability in the corporation confine.
Limited liability found its inception with regards to companies in 1854 in the Limited Liability Act 8. The justification for its inception can be found in
8 18 & 19 Vict. c133. This Act was repealed soon after and later
incorporated in the Joint Stock Companies Act 1856.
arguments conveniently summarised by Farrar 9 as follows:
limited liability allowed small capital to be turned to profitable employment;
it was a question of free trade against monopoly;
unlimited liability was impracticable and impeded work such as railways, canals and docks;
unlimited liability prevented prudent men from becoming members of companies which were consequently being formed by the rash and reckless.
Interestingly, there were a number of arguments against the introduction of limited liability 10. Some of these arguments were:
limited liability was not a privilege to be given to partners but it was a right to be taken from creditors;
it encouraged people to trade beyond their means;
it led to speculation and fraud;
there was adequate capital available without it.
Up until the passing of the Limited Liability Act 1854, a form of limited liability existed in a practical sense in particular circumstances. For instance, it was common for clauses to be included in deeds of settlement and prospectuses 11 which limited the liability of those behind the scheme. According to Gower 12 :
..."[U]nlimited liability, though a danger to the risk taker, was often a snare and a delusion rather than a protection to the public and no handicap at all to the dishonest promoter. The difficulties of suing a fluctuating body and the even greater difficulties of levying execution made the personal liability of the members largely illusory. Moreover, the investor was supposed to become a member by signing the deed of settlement and until he did so his identity would
9 Farrar, J., Company Law, Butterworths 1985 ed. London, at 18.
10 Farrar, J., Company Law, Butterworths 1985 ed. London, at 18.
11 Such limiting clauses were held to be ineffective from 1854.
12 Gower LCB, Gower's Principles of Modern Company Law 4th ed. 1979,
Stevens & Sons London at 36.
warning the public of the perils which they faced if they had dealings with the dangerous new invention." [bold added]
The question which can be asked is whether the colour of this `red flag' has faded? Historically, creditors have been precluded from recovering from shareholders or directors an amount in excess of the unpaid amounts on their shares, yet both the courts and the legislature have widened the gaps in the corporate veil. As mentioned at the beginning of this Chapter a number of situations now exist whereby directors and others who take part in management of a corporation will be personally liable for debts incurred by the company. This liability may be exclusive personal liability or concurrent liability with the company. Whatever the liability, the distinct legal personality pronounced in Salomon's case 14 by the House of Lords has been shown, on occasions, not to be an immutable principle. Both the legislators and the courts lift the corporate veil and seek out the realities of the situation. They may deny the usual legal consequences of incorporation and of the red flag. Further legislation directly imposes personal liability upon management. Limited liability is not sacrosanct and the principle in Salomon's case no longer rules.
Since the decision in Salomon's case there has been a steady stream of common law decisions and legislative enactments which have eroded the immutability of the separate legal entity doctrine and have thus exposed officers to personal liability to a company's creditors. These decisions and enactments are conveniently seen as ways to `lift or pierce the corporate veil' 15.
According to Easterbrook and Fischel, "piercing seems to happen freakishly ... like lightning, it is rare, severe and unprincipled." 16 But this so called freakish happening has occurred on a number of grounds. Farrar notes
14 [1897] AC 22.
15 In Qintex Australia finance Ltd v Schroders Australia Ltd (1991) 9
ACLC 109, Rogers CJ suggested that the whole issue of the separateness of the corporate legal entity be re-examined in the light of the so-called tension between the realities of commercial life and the applicable law. Although his Honour in the case at hand had to determine which company in the Qintex group of companies should be able to claim the benefit of the contract entered into, a number of more general remarks were made concerning the separate legal entity doctrine. According to his Honour, (at p 111) it may be desirable "for Parliament to consider whether this distinction between the law and commercial practice should be maintained. This is especially the case today when the many corporate collapses of conglomerates occasion many disputes."
16 Easterbrook FH and Fischel DR., Limited Liability and the
Corporation, (1985) Uni of Chicago Law Review 7 at 89.
that 17 :
"... [I]t is difficult to rationalise the cases except under the broad, rather question-begging heading of policy and by describing the main categories under which they fall. These are:
agency;
fraud;
group enterprises;
trusts;
enemy;
tax;
the Companies Act itself."
We will now analyse some of these grounds under the convenient headings of "common law" and "statute".
(1) Common Law
(a) Fraudulent use of the corporate form
Lord Halsbury in Salomon's case acknowledged that the corporate veil will not protect a fraudulent person hiding behind the corporate structure. Illustrative of this is the decision in Gilford Motors Co Ltd v Horne [1933] 1 Ch D 935.
In this case the defendant was employed under a service contract as managing director of the plaintiff company. As part of this contract he was forbidden, when ceasing his employment with the company, from taking away the plaintiff's customers. The defendant left the plaintiff company, formed a competitive business and a company in which he was one of three shareholders. The new company solicited the plaintiff's customers and the plaintiff sought an injunction restraining this conduct. The defendant argued that he was not soliciting customers of the plaintiff and that if there was any solicitation, it was from a separate legal entity, namely the new company which had no contract with the plaintiff. This argument was rejected by the Court.
17 Farrar JH., Company Law, 1985 ed, Butterworths, London at 57. This
categorisation was accepted by Young J, in Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1987) 5 ACLC 467 at 474.
carried out without regard to the separate entity of Breachwood Welwyn Ltd and the interests of its creditors, especially Creasey, if his claim for wrongful dismissal were to succeed.
As a result of the actions of F, S and Breachwood Motors Ltd, Creasey found himself with a judgement against Breachwood Welwyn Ltd, an insolvent company, the assets of which had been removed to Breachwood Motors Ltd. Breachwood Motors Ltd refused to meet any part of the judgement. One of the questions which had to be decided was whether the corporate veil could be pierced?
The Court held that the corporate veil could be pierced. Nothing could justify F and S's conduct in deliberately shifting Breachwood Welwyn Ltd's assets and business into Breachwood Motors Ltd in total disregard of their duties as directors and shareholders. This meant that Breachwood Motors Ltd were liable for the liability of Breachwood Welwyn.
(b) Agency
In some circumstances a company may act as an agent for others, for example, shipping agents or investment brokers. Moreover, it is possible for a company to act as the agent for its own shareholders. This may be done by express contract or impliedly.
In Smith, Stone & Knight Ltd v Birmingham Corp [1939] 4 All ER 116, Birmingham Corporation, a local council, compulsorily acquired premises owned by the Birmingham Waste Co. Ltd. This company was a wholly-owned subsidiary of Smith, Stone & Knight Ltd. Indeed, of the 502 issued shares in the waste company, 497 were held by Smith, Stone & Knight and the other 5 were held on its behalf. The Waste Company had no staff, no separate books of account and on the evidence it was treated like one of Smith, Stone & Knight's departments. Accordingly a claim for compensation for loss of business was made by Smith, Stone & Knight Ltd. Birmingham Corporation argued that Smith, Stone & Knight Ltd. could not succeed because the loss had been sustained by the waste company - a separate legal entity.
The Court held that compensation was payable as the Waste Company was carrying on no business of its own but was in fact carrying on the Smith, Stone & Knight business as agent for them.
Atkinson J held that the following six factors must be proven in order to show the requisite agency relationship and thus be able to lift the corporate veil:
Profits of the subsidiary must be treated as profits of the holding
company;
Those conducting the subsidiary's business must be appointed by the holding company;
The holding company must be the head and brain of the trading venture;
The holding company must be in control of the venture and must decide what capital should be spent and what should be done;
The profits made by the subsidiary's business must be made by the holding company's skill and direction; and
The holding company must be in constant and effective control.
This decision was adopted in Pioneer Concrete Services Ltd v Yelnah Pty Ltd & ors (1987) 5 ACLC 467. In this case a dispute occurred between major competitors in a concreting industry. Hi-Quality Concrete (Holdings) Pty Ltd was the holding company for a large group of companies, known as the Hi-Quality group. This group was under the control of Messrs Hargreaves, Ward and Armstrong. Hi-Quality Concrete (NSW) was part of this group and was a fully-owned subsidiary of the holding company.
In 1982 Hargreaves, Ward and Armstrong together with Hi-Quality Concrete (NSW) Pty Ltd and Hi-Quality Concrete (Holdings) Pty Ltd entered into a deed with the plaintiff. In the deed "Hi-Quality" was defined as Hi-Quality Concrete (NSW) Pty Ltd. In 1985 the holding company entered into transactions which were alleged to be in breach of this deed. The other members of the group denied any breach of the agreement on the basis that they were not parties to the 1985 transactions and that the holding company was not a party to the 1982 deed.
The Supreme Court of New South Wales held that the specific provision defining "Hi-Quality" meant that the holding company was specifically excluded from the promises in the 1982 deed and therefore could not be in breach of the deed. Young J acknowledged the separateness of the legal entities involved and held that on the facts there could be no imputation of the promise by the subsidiary to the holding company. In other words the corporate veil could not be lifted. Importantly the court could not infer an agency agreement, nor could they find a partnership between the companies in the group or a sham or a facade 20. Further there was "no question of a corporation being formed for the sole purpose or for the dominant purpose of evading ... a contractual or fiduciary obligation." 21
20 (1987) 5 ACLC 467 at 476.
21 (1987) 5 ACLC 467 at 477.
Ltd were disturbed, however they argued that those two companies were not entitled to any compensation at all because they had no interest in the land. The council argued that DHN was only a licensee of Bronze Investments Ltd. Under the Compulsory Purchase Act 1965 (UK) if a person has no greater interest than a tenant from year to year in the land, then he is only entitled to compensation for that lesser interest. As a licensee can be evicted on short notice, the compensation payable to DHN would be negligible.
The English Court of Appeal treated the companies as one economic entity and following from this, DHN could be treated as owner of the property and was thus entitled to compensation for disturbance to its business 24. According to Lord Denning 25 :
"We all know that in many respects a group of companies are treated together for the purpose of general accounts, balance sheet, and profit and loss account. They are treated as one concern. Professor Gower in Modern Company Law (3rd ed., 1969), p 216 says: ... `there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group.' This is especially the case when a parent company owns all the shares of the subsidiaries - so much so that it can control every movement of the subsidiaries. These subsidiaries are bound hand and foot to the parent company and must do just what the parent says ... They should not be treated separately so as to be defeated on a technical point. They should not be deprived of the compensation which should justly be payable for disturbance. The three companies should, for present purposes, be treated as one, and the parent company DHN should be treated as that one 26 ."
Lord Goff also believed that this was a case in which one was entitled to look at the realities of the situation and to pierce the corporate veil. In his Lordship's opinion 27 :
24 For a discussion on this point see Re Securitbank Ltd [1978] 1 NZLR
97 at 133 and Industrial Equity Ltd v Blackburn (1977) 137 CLR 567.
25 [1976] 1 WLR 852 at 860.
26 The decision in DHN was approved in Amalgamated Investment &
Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1983] QB 84. However the case was distinguished in Woolfson v Strathclyde Regional Council (1978) 38 P & CR 521. Lord Keith of Kinkel at 526 expressed doubt as to whether the decision in DHN correctly applied the principle that it is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere facade concealing the true facts.
"I would not at this juncture accept that in every case where one has a group of companies one is entitled to pierce the veil, but in this case the two subsidiaries were both wholly-owned; further they had no separate business operations whatsoever; third, in my judgment, the nature of the question involved is highly relevant, namely, whether the owners of this business have been disturbed in their possession and enjoyment of it."
An Australian illustration of this "group enterprise" circumstance occurred in Hobart Bridge Co Ltd (in liq) v Commissioner of Taxation (1951-52) 25 ALJ 225. In this case the appellant was granted a franchise to build a bridge across the Derwent river in Tasmania. The company's source of revenue was to include profit from the subdivision and sale of land adjacent to the bridge. The promoter had secured options over the land and a subsidiary company was formed to purchase it. The appellant held approximately nine-tenths of the shares in the subsidiary. No sales of land were made by the subsidiary, however some preparatory work was done. An Act was passed whereby the government acquired all the undertaking of the appellant and later they acquired all of the shares in the subsidiary company. By the share transactions the appellant made a substantial profit.
The respondent treated this profit as assessable income earned pursuant to a profit-making scheme of which the subsidiary was the "collecting medium".
The High Court rejected this and held that the subsidiary was not to be deemed the medium or machinery for a scheme. There was to be no lifting of the corporate veil simply because the formation of the subsidiary reduces tax liability. The subsidiary had a real existence and a valid reason for its incorporation.
Kitto J referred 28 to the judgment of Lord Sumner in Gas Light Improvement Co v Inland Revenue Commissioners 29 where his Lordship stated:
"It is said that all this was `Machinery' but that is true of all participations in limited liability companies. They and their operations are simply the machinery, in an economic sense, by which natural persons, who desire to limit their liability, participate in undertakings which they cannot manage to carry on themselves, either alone or in partnership, but, legally speaking, this machinery is not impersonal though it is inanimate. Between the investor, who
27 [1976] 1 WLR 852 at 861.
28 (1951-52) 25 ALJR 225 at 228.
29 [1923] AC 723 at 740-741.
Topic 4 - The company as a corporate entity
Course: Company Law (2106AFE)
University: Griffith University
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