UK Company Law

However, the Court of Appeal stuck to a rigid interpretation of Salomon. It ruled that the right to use a corporate structure in this manner is inherent in our corporate law. … in our judgment Cape was in law entitled to organize the group’s affairs in that manner … That the arrangement served to protect the parent corporation from liability was not, in and of itself, illegal. In fact, the court held that in not specifically legislating against that very possibly the act was, implicitly, condoning application of the act in that manner.Had that have been the extent of the legal reasoning the case would hardly be regarded as a landmark. Nor would it merit the praise that Boyle and Birds give to it. They assert that it brought, ‘some order to the rather confused body of case law relating to the question of lifting the veil where groups of companies are concerned.’The court considered three legal arguments in coming to the conclusion that the British parent was not liable for the actions of other members of the group. In dismissing each it implied arguments or exceptions that could, on a case-by-case basis, be argued as reasons to lift the corporate veil in the interests of corporate transparency. It is in this sense, by establishing the key issues at law, in questions of intra-group liabilities, that it represented a landmark. It did not necessarily answer the questions, but it presented the questions that had to be considered on a case-by-case basis, to rule on the corporate veil and intra-group liabilities.First, the Court of the Appeal considered the possibility and significance of Cape and its American subsidiaries operating as a single economic entity. In D.H.N. FOOD DISTRIBUTORS LTD. v. TOWER HAMLETS LONDON BOROUGH COUNCIL, BRONZE INVESTMENTS LTD. v. SAME, D.H.N. FOOD TRANSPORT LTD. v. SAME [1976] 1 W.L.R. 852 the Court of Appeal ruled that multiple corporate entities operating as one were to be seen as one: This case might be called the Three in one. Three companies in one. Alternatively, the One in three. One group of three companies. For the moment I will speak of it as the firm, began Lord Denning’s decision.

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