Chapter 4 Self-test questions

. Which one of the following statements is false?

In the case of Salomon, the House of Lords held that a company will not normally be an agent of its members.

In the case of Salomon, the House of Lords held that statute did not require the members to be independent or active.

The House of Lords in Salomon established the concept of corporate personality.

In the case of Salomon, the House of Lords held that a company could legitimately be used to shield its members from liability.

. Identify which of the following statements are true.

The country where a company is registered determines its domicile.

A company can change its domicile.

The country where a company is registered determines its nationality.

A company can change its nationality.

The country where a company is registered determines its residence.

A company can change its residence.

A company can only have one residence.

. What is corporate personality?

Corporate personality means that the members in general meeting are regarded by the law as a person.

Corporate personality means that the board of directors is regarded by the law as a person.

Corporate personality means that the company as an entity is regarded by the law as a person.

Corporate personality means that all of the companies within a corporate group are regarded by the law as one person.

. Which one of the following is not a consequence of corporate personality?

A company cannot be owned.

Perpetual succession.

Limited liability.

Ownership of assets.

The business undertaken is that of the company.

Contractual capacity.

A company can commence and defend legal proceedings.

A company can create, and participate in, other business structures.

. Regarding a company's corporate personality, identify which of the following statements are false.

A company's corporate personality can only be set aside by statute.

Corporate personality is granted to a company by statute.

The courts will only disregard a company's corporate personality where a relationship of agency can be established.

The courts are more likely to disregard the corporate personality of a public company than a private company.

. Which one of the following cases is regarded as the leading case on the piercing of the corporate veil?

Adams v Cape Industries plc

Antonio Gramsci Shipping Corp v Stepanovs

Petrodel Resources Ltd v Prest

VTB Capital plc v Nutritek International Corp

. The comments of the Justices regarding corporate personality in Petrodel Resources Ltd v Prest were only obiter.

True.

False.

. In Petrodel Resources Ltd v Prest, Lord Sumption stated that there is only one instance in which the courts can pierce the veil. What is this one instance?

Where a subsidiary is acting as an agent for the parent.

Where a group of companies are to be regarded as a 'single economic unit.'

Where a person is under an existing legal obligation which he deliberately evades or whose enforcement he frustrates by interposing a company under his control.

Where a parent owes the employees of its subsidiary a duty of care.

. In order for the evasion principle in Prest to apply and liability to be placed on a person (X), three conditions will need to be satisfied. Which one of the following is not one of these conditions?

There must be an existing legal obligation, liability or restriction that is placed on X

X must be a director or member of the company being interposed.

The company being interposed must be under X's control.

X must interpose a company in order to evade or frustrate the liability in question.

. In Chandler v Cape plc, did the Court of Appeal pierce the corporate veil?

Yes.

No.

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