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

Halden Ltd is a subsidiary of Vorn Ltd. A tort victim injured by a Halden employee sues Vorn Ltd, arguing that Vorn's control over Halden means the veil should be lifted. Vorn simply owns the shares and appoints Halden's directors, who run its day-to-day business independently. Which is the strongest reason the claim is likely to fail?

The claim is likely to fail because Halden was not acting as Vorn's agent and mere share ownership and appointment of directors do not make a parent liable. Courts lift the veil only for sham, facade or agency, not simply because of control.

  1. ACourts never lift the veil in tort cases
  2. BHalden was not acting as Vorn's agent, and ownership and appointing directors do not make a parent liable for the subsidiary's actsCorrect
  3. CVorn Ltd has limited liability only if it is a public company

Explanation

Following Adams v Cape Industries, the veil is not lifted merely because a parent controls a subsidiary or to achieve justice. Liability needs a sham, facade or a genuine agency relationship. Here Halden runs itself independently. Option one is wrong because courts may lift the veil in limited cases, including some involving tort.

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