Lifting the veil refers to a situation or a circumstance where a judge or the judiciary has decided
to remove the statutory separation of the personality of a firm and the members or directors of
1).All the directors of the companies registered in the US have legal obligations and duties under
the corporations Act and subsequent statutes which require that companies do not acquire any
debts while it’s insolvent. It’s the directors’ fundamental duties and obligations to ensure that the
Act is abided with and it’s also their primary role to exercise due care and diligence as part of
their duties. They are directly responsible for any acts of omission or commission on the part of
their employees that may result in misinformation on their decisions or judgments when a wrong
decision has been made. The directors have no legal basis to contest any wrong decisions on the
basis of ignorance. In the of case of OHS, Emma’s reason that lack of financial knowledge on
the company financial status made her make the wrong decision portrays her ignorance. The
absence of her employee who was apparently sick does not make any difference in the matter in
Corporations law 2
question. If a court case is instituted against OHS then the plaintiff may petition the court to lift
the veil of incorporation on the basis that the directors of OHS breached their legal duty of care.
(Gallagher and Ziegler, 1990) They did not take adequate measures to ensure that the company
was insolvent and was therefore not entitled to borrow any more money. (Gower and Davies,
2a). A family company cannot be appointed as a director. A accompany is an artificial person
though its recognized in law, it cannot serve as a director. The only option in this case is to allow
a board member from the family company to serve as a representative of the family and its
registered company to serve as a director. Lack of a company secretary is immaterial in this
instance. Any board member can be appointed as a director as long as the family has agreed on
2b). Falsifying company documents is a serious offence in the US. The provisions of Sarbanes
Oxley Act clearly outline the extent to which such offences may be dealt with and the process to
in which they may be prevented. Ms Avoider may not be allowed to hold office as a director as
the charges that she has been convicted of don’t allow her to hold such a position.
2c) Mr. Marginal who is suffering from Alzheimer’s disease cannot fully discharge his duties
fully as a director as such the law allows his trustee to represent him as a director of the No Tax
Agents Pty ltd. The trustee can act on his behalf with equal voting rights.
2d) Mr. Shifty’s family company, assuming it’s a limited company, then Mr. Shifty has no
problem to worry about as his personal properties are protected by law. (Salmon Vs Salmon) The
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family company and his family members and directors are different entities and the law
recognizes this separation.
2d). These would amount to a criminal offence as the law limits the minimum bankruptcy period
to be three year. (McAuley, 2010) These means that Mr. Shifty breached the provisions of
Bankruptcy Act. Mr. Shifty is supposed to remain inactive and serve as a bankrupt for a period
of three years before applying for a release order in a court of law. Mr. Shifty has committed an
offence that may allow the court to lift the veil of incorporation incase the creditors petition the
court for such an order.
Gallagher and Ziegler (1990) Lifting the Corporate Veil in the Pursuit of Justice. JBL 292.
Gower and Davies’ (2008) Principles of Modern Company Law, London: Sweet & Maxwell,
McAuley, S. (2010) Reducing The Minimum Bankruptcy Period. Australian insolvency Journal-