Piercing the Corporate Veil: illusion, reality or alternative remedy? part 1

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Author Elaine Obika

Date July 2023

INTRODUCTION

The doctrine of piercing the corporate veil remains one of the most contested areas of company law. Despite its dramatic language, courts have repeatedly questioned whether it exists as a coherent principle or merely as a label for outcomes reached through other legal mechanisms. This short analysis examines the reasoning in Prest, VTB, and earlier authorities such as Gilford Motor, exploring whether veil‑piercing is an illusion, a reality, or simply a misdescription of alternative remedies.

In Prest, Lord Walker suggested that “piercing the corporate veil” is not a true doctrine but a label used to describe exceptional situations where liabilities are imposed on controllers despite the separate legal personality established in Salomon. On this view, the courts do not pierce the veil as a matter of principle; rather, they rely on statutory provisions or established common law routes to reach the controller, making veil‑piercing a descriptive convenience rather than a substantive doctrine.

Lord Sumption, also in Prest, argued that earlier cases such as Gilford Motor are better understood through the evasion and concealment principles. Although the injunction against Mr Gilford has often been cited as an example of veil‑piercing, Lord Sumption clarified that the remedy was grounded in equitable principles and could have been granted through tortious analysis. He further emphasised that veil‑piercing should only be considered where no other remedy is available. On this reasoning, it is unlikely that the veil was pierced in Gilford, since an action in tort was already open to the claimant.

Lord Neuberger, in VTB, similarly questioned whether the doctrine has ever been successfully invoked. He noted that the outcome in Gilford would have been the same even if the company had been replaced by Mrs Gilford, echoing the reasoning in Smith v Hancock. His judgment in Prest was directed at the deeper question of whether veil‑piercing exists at all as a freestanding doctrine.

Ottolenghi supports this sceptical view, arguing that where liability is imposed on directors for fraudulent trading, it is inaccurate to describe the outcome as lifting the veil. Instead, the liability arises from statutory or common law principles independent of corporate personality

REFERENCES

1.Prest v Petrodel Resources Ltd v Others [2013] UKSC 34. 

2. Prest v Petrodel Resources Ltd v Others [2013] UKSC 34 [31] - [32]. 

3. Mohammed E Khimji v Christopher C Nicholls ‘Piercing the Corporate Veil Reframed as Evasion and Concealment’ (2015) 48 University of British Columbia Law Review 401. 

4.Prest (n1). 

5.Gilford Motor Co Ltd v Horne [1933] Ch 935. 

6.Prest (n1) [29]. 

7.VTB Capital plc v Nuritek International Corp [2013] UKSC 5 [134]. 

8.Prest (n1) [29]. 

9.Charlottoe Kouo ‘Post-Prest Corporate Group Veil Piercing: Alternative Avenues to Justice (20160 4(2) Legal Issues Journal 45. 

10.Prest (n1) [26]. 

11. VTB (n7). 

12.Smith v Hancock [1894] 2 Ch 377. 

13. Prest v Petrodel Resources Ltd v Others [2013] UKSC 34 [80]. 

14. Insolvency Act 1986 s 213. 

15.Ottolenghi S ‘From Peeping Behind the corporate Veil, to Ignoring it Completely’ (May 1990) vol 53 Modern LawReview 338. 

BIBLIOGRAPHY 

Primary sources 

Cases 

Gilford Motor Co Ltd v Horne [1933] Ch 935 

Prest v Petrodel Resources Ltd v Others [2013] UKSC 34 

Smith v Hancock [1894] 2 Ch 377 

VTB Capital plc v Nuritek International Corp [2013] UKSC 5 

Legislation 

Insolvency Act 1986 

Secondary sources 

Khimji M E v Nicholls C C ‘Piercing the Corporate Veil Reframed as Evasion and Concealment’ (2015) 48 University of British Columbia Law Review 40 

Kouo C ‘Post-Prest Corporate Group Veil Piercing: Alternative Avenues to Justice (20160 4(2) Legal Issues Journal 45 

Ottolenghi S ‘From Peeping Behind the corporate Veil, to Ignoring it Completely’ (May 1990) vol 53 Modern LawReview 338

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