Skip to content

ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality

Delta Ltd is wholly owned by Karim. Karim is a director and controls every decision, but Delta Ltd is run as a genuine trading business with its own bank account and accounts. Delta Ltd breaches a contract with a customer. Which statement is correct?

The court will not lift the veil. Complete control by a single shareholder-director is not enough; the veil is lifted only in exceptional circumstances such as fraud or sham. The customer's claim lies against Delta Ltd, not Karim personally.

  1. AThe court will lift the veil because Karim controls the company completely
  2. BThe court will not lift the veil, as control alone is not a ground for ignoring separate personalityCorrect
  3. CThe customer may sue Karim personally because he is the company's agent in every contract

Explanation

Control by one shareholder does not justify lifting the veil; courts do so only in limited cases such as fraud or evasion of an existing legal obligation. Here the company is a genuine business. Karim signing as director does not make him a party personally.

Did you get it right without looking?

One question tells you little. A timed set on Corporations and legal personality shows your real accuracy, how long you take and where you lose marks.

Practise Corporations and legal personalityFree diagnostic mock

More Corporations and legal personality questions