Topic hub
Corporate personality, directors' duties, minority protection — 22 company cases
Company law governs the creation, operation, and dissolution of companies incorporated under UK statute, sitting at the intersection of contract, equity, and statute. Its central question is how the law should balance the interests of shareholders, directors, creditors, and the public when a separate legal personality — the company itself — stands between individuals and their commercial dealings. The Companies Act 2006 provides the primary statutory framework, but judge-made doctrine remains indispensable for filling its gaps.
Four doctrines define the subject. The separate legal personality principle, established in Salomon, is the bedrock: a company is a legal person distinct from its members, capable of owning property and incurring liabilities in its own name. Built on top of that sits the rule in Foss v Harbottle, which determines who may sue for a wrong done to the company and therefore controls access to the courts. Directors' duties — now codified in the Companies Act 2006 but still interpreted through equitable case law — ask how far those running the company must subordinate personal interests to the company's, and the doctrine of piercing the corporate veil asks when, in rare cases, the courts will look through separate personality altogether.
Several tensions remain live and examinable. Courts continue to wrestle with when, if ever, the corporate veil should be pierced after the Supreme Court's cautious treatment in Prest v Petrodel Resources, which preferred proprietary reasoning over veil-piercing. The scope of the no-profit and no-conflict duties remains contested, particularly whether they apply to former directors and in family-company contexts as shown by the divergence between Bhullar and earlier authorities. Minority shareholder protection also sits in flux: the statutory unfair prejudice remedy under s.994 is expanding in practice, raising questions about whether the equitable winding-up jurisdiction from Ebrahimi is becoming redundant.
A company incorporated under statute is a legal person entirely distinct from its shareholders and directors, capable of owning property, suing, and being sued in its own name. This means members are not personally liable for the company's debts beyond any amount unpaid on their shares.
Courts will only disregard separate personality in narrow circumstances where a person is under an existing legal obligation and deliberately interposes a company to evade it; the veil cannot be pierced merely because justice seems to require it. Where possible, courts prefer orthodox proprietary or agency reasoning over true veil-piercing.
Directors owe fiduciary duties to the company — not to individual shareholders — including duties to act in good faith in the company's interests, to exercise powers for proper purposes, and to avoid conflicts of interest. These duties, now codified in the Companies Act 2006 ss.171–177, are interpreted against a rich equitable case law background that remains binding on their meaning.
A director must not place themselves in a position where their personal interest conflicts with their duty to the company, and must not make an unauthorised profit from their position, even if the company could not have taken the opportunity itself. The rule is strict: good faith is no defence to an undisclosed profit.
The rule in Foss v Harbottle restricts individual shareholders from suing for wrongs done to the company, but statute and equity provide remedies where the majority abuses its position: the unfair prejudice petition under s.994 Companies Act 2006 and the equitable just-and-equitable winding-up jurisdiction protect shareholders where legitimate expectations have been breached. Courts also scrutinise majority votes that, while formally valid, are exercised in a way that is inequitable towards minority members.
“General corporate policies insufficient to establish parent company duty of care.”
“Supreme Court restricts corporate veil piercing to evasion of existing obligations”
“Corporate veil pierced only when incorporation evades existing legal obligations.”
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“Parent companies can owe direct duty of care to subsidiary's employees.”
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