ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality
Under which circumstance would a court in a common law jurisdiction be most likely to disregard a company's separate legal personality?
A court is most likely to disregard separate personality where a company is formed as a facade to avoid an existing legal obligation. High shareholding or trading losses are lawful and do not by themselves justify lifting the veil.
- AA company is formed to avoid an existing legal obligation, and it is a facadeCorrect
- BA shareholder owns 90% of the company's shares
- CA company has made a loss for three consecutive years
Explanation
The veil is lifted where a company is a sham or facade used to evade existing obligations. High shareholding and trading losses are lawful features of companies and do not justify disregarding separate personality.
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