Skip to content

ACCA Applied Skills · Corporate and Business Law (Global) · The formation and constitution of a company

Which of the following is a situation where a court is most likely to lift the corporate veil?

A court is most likely to lift the veil where a company is a sham created by its controller to conceal fraud on creditors. Ordinary features such as limited liability, group membership or a director holding most shares do not justify ignoring separate personality.

  1. AA company's shareholders have limited liability for its debts
  2. BA company is a subsidiary within a corporate group and trades at a loss
  3. CA company is a sham created by its controller to conceal fraud on creditorsCorrect
  4. DA company has a single director who is also its majority shareholder

Explanation

Courts lift the veil where the company is a sham or façade used to conceal fraud or evade obligations. Limited liability, group membership and a combined director-shareholder role are ordinary features of company law and do not justify disregarding personality.

Did you get it right without looking?

One question tells you little. A timed set on The formation and constitution of a company shows your real accuracy, how long you take and where you lose marks.

Practise The formation and constitution of a companyFree diagnostic mock

More The formation and constitution of a company questions