«getting responsibility» in the English right

General characteristic of "getting responsibility». In legal system of England (and the Wales) the concept of "getting responsibility» the persons supervising corporation, basically is concentrated within the limits of the doctrine of "removal of a corporate veil» (lifting corporate veil) which, unlike the American right, is applied much less often though between them and much in common.

According to one English lawyers, courts «remove a corporate cover» that «to study a reality», being for it [284], instead of for this purpose, probably that it is obligatory to make someone accountable; according to others, «the corporate veil» acts in film for the sake of justice [285]. Anyhow, but it not unique means of restoration of justice in the right of England and the Wales.

Courts in England quite often make accountable the participant of corporation as the actual director, and also apply other approaches, allowing to solve the problems similar to the concept of "penetration". For example, eventualnost attraction of participants of corporation to a joint liability it is provided in procedure of bankruptcy [286] which, however, is applied to some extent in many правопорядка*.

The legislation on responsibility within the limits of groups of the companies has not got here the big support that is why is not developed [287] though from time to time attempts to change such state of affairs at law level are undertaken [288] but while they have not brought special result [289].

«Removal of a corporate veil» in England not only quantitatively differs from the American approach. If the English court makes the decision on «removal of a corporate veil», it does not mean automatic destruction of a principle of an autonomy of corporation and impeachment of its participants [290]. The court can make it, as shown more low, pursuing and other purposes. Some English jurists allocate on the basis of the mixed principle (proceeding from the purpose and "penetration" consequences) versions «removals of a corporate veil», being guided thus with criterion of volume and "intensity" of ignoring of a principle of branch:

1. «Zagljadyvanie for a corporate curtain» (peeping) — it is used for information reception about benefitsiarah corporations;

2. «Penetration for corporate covers» (penetrating) — occurs, when it is necessary to make participants of corporation accountable;

3. «Extension of a corporate veil» (extending) — is applied to impeachment of group of the companies;

4. «Corporation ignoring» (ignoring) — completely denies existence of the company [291].

However, it is necessary to note convention of such classification. So, only the second point from specified above can be carried with confidence to actually «getting responsibility» while the third point can be ranked as it with the big stretch as it, as well as corporation ignoring (which in general it is extremely seldom used in English judiciary practice) (item 4), represents more likely an "identification" category in the corporate right.

English justice t.o. Resorts to «removal of a corporate veil» rather reluctantly and it therefore plays a small role in the corporate right.

Even when the bases for intervention in property sphere of participants of the company look serious enough, as well as in a case with nedokapitalizirovannymi the companies of one person, the interventional approach of court is improbable [292]. Moreover, English courts, using limited interpretation, will neutralise attempts of the legislator to expand sphere of application of the concept of ignoring of the legal person and attraction of its participants to responsibility [293].

Key precedent. As the first reason of formation of a reserved position concerning encroachments on property of participants of the legal person, the business considered by the House of Lords in 1897 — «v. Salomon and Co has served.», which prevails till now over all file of the English right about corporations. On this business it is necessary to stop in detail, as it is corner as for the right of England and the Wales, and other countries of the British commonwealth (with some reservations) [294]. Detailed analysis of this business is included into all English textbooks and seminar employment by the corporate right [295]. The relation to the company of one person, generated by the judiciary in this precedent, — a key to understanding of a principle of an autonomy of corporation, limited liability and «removal of a corporate veil» in English understanding.

According to a business plot, Mr. Salomona had in the property a shoe enterprise. In 1892 it has founded the company «Salomon and To. Ltd.». Besides it, his wife and five children became participants of the company, each of which has received under one action (share), and Mr. Salomon, besides the one action, has received also a post of the director. Anybody from members of his family, except it, had no intention really to take part in its company as actions have been issued on them only to execute requisition of the law that the company should incorporate not less than seven participants.

After a floating of a company Mr. Salomon, operating as the individual businessman, has sold to it the shoe business, «it is a little having overestimated» of it, having charged price in 39 000, that was the fantastic sum for the small shoe enterprise in east suburb of London [296]. However Mr. Salomon also did not pursue, as he said, a problem to state a fair market estimation of the actives. The financial genius of Mr. Salomona consisted in how it structured the perfect transaction. As counter granting it has received from the company 10 000 in the form of bonds with "floating" pledge on all property of the company (floating charge), 20 000 actions (on 1 for the action) and 9 000 money. Thus, it became the holder of 20 001 actions of the company. After that Mr. Salomon has completely paid off with the creditors. Practically right after it the founded company began to test financial embarrasments, and Mr. Salomon has been forced to sell the received bonds, having sent the obtained means for business support. A year later concerning the company at the initiative of the holder of bonds, Mr. Broderipa, bankruptcy procedure as at the company at all does not remain property has been entered.

Mr. Broderip challenged the transaction structured by the founder and demanded the debt collection personally from Mr. Salomona, approving, that the company founded by it is fictitious (sham) and there is that other, as «other name» (alias) most Salomona. The Appeal court has supported the claimant, having specified, that other six participants of the company-respondent, having received actions, should really (bona fide) to have intention to be participants of the founded company, otherwise company is not founded [297].

At the same time the House of Lords has unanimously cancelled the appeal decision, having supported the respondent and having noticed, that in the law on the companies there is no mention about bona fide participants, in it that participants should be a minimum seven is only specified. Motives of participation in the company have no value as any deceit (fraud) from their party it has not been established. The enterprise belonged to the company, instead of to Mr. Salomonu and last as the director is the agent of the company, and in any way on the contrary.

The concept of the director. Business Salomona allows to throw light only on a problem part, namely — to designate border of a principle of branch in England. Besides business Salomona, as the second reason of the limited application of the doctrine of "removal of a corporate veil» in England use of different ways of struggle against abusing the corporate form or limited liability "privilege" (abuses of limited liability) has served. Among other, English researchers name wider attraction to the personal responsibility of directors of the company (as in their hands the management of operative activity in which only and there can be abusings is concentrated) [298]. According to the author, it is doubtful to consider such reception by means of struggle against abusings, being covered with a branch principle as limited liability protects participants of corporation, instead of its director. The director is protected by other principle — it the agent of the company [299] represented to it that is why, under the general rule, possesses immunity from claims to its personal property under obligations of the principal.

Meanwhile stated doubt is actual only for so-called de jure directors (appointed director). The English corporate right discriminates still actual (de facto director) and shadow directors (shadow director). Difference between them that the first does not hide the intention (represents the director at business negotiations and so forth) and actually carries out functions of the head, and therefore the law considers it as the usual director who even can be disqualified [300]. The second wishes to hide the participation in a corporate life of the company to avoid responsibility, but operates business, giving to the instruction to the appointed directors [301].

The design of "the shadow director» by who can be recognised any person really operating the company [302] (including participants, but lowering professional advisers), looks enough attractive struggle in sphere with the mentioned abusings and offences owing to displacement of negative accent on the one who really makes of the decision. The problem here consists in other: whether the actual head can be involved in "external" responsibility? Courts resolve attraction to such responsibility in variety of cases which do not cancel the main rule about it prezjumiruemoj neotvetstvennosti before the third parties.

If the head of the company eksplitsitno guarantees execution by the company of the obligations within the competence, it obliges the director personally [303]. If the person is represented the director [304], it yet does not mean absence at it intention personally to be obliged under the contract [305]. Qualification of boundary cases especially becomes complicated within the limits of the oral contracts concluded by the company where to the aid of court concomitant circumstances of business come only.

In some limited cases the director can be involved in solidary "external" responsibility for the tort made by the company: for example, if it has instructed to make such offence or has provided its fulfilment [306], and such instructions should be not necessarily expressed in the obvious form. At the same time over the company which has made the tort, it is not enough simple control of the director for attraction of the head to the specified responsibility.

Wrongful business management. The important role in the field of struggle against abusings the corporate form and corporate offences in the right of England is played by rules «fraudelent and wrongful trading» [307], i.e. the activity leading to a deceit of creditors or made in other dishonest purposes. It is the third reason of the limited application of the concept «removals of a corporate veil» in the English right. In one of the most authoritative English textbooks by the corporate right this institute is named as the most considerable exception of a rule generated in business Salomona, which while was possible to achieve in the English right («the most extreme departure from the rule in Salomon's case yet achieved in the United Kingdom») [308]. At the same time some jurists specify in limitation of application of the concept «fraudelent and wrongful trading» in practice [309].

At the heart of the specified rules the thesis lays, that a principle of branch of property of corporation together with limited liability of its participants condition for a deceit of creditors (generate an incentive to defraud creditors) corporations from the persons supervising it [310]. Result of application of the doctrine «fraudelent and wrongful trading» is attraction of persons on which such actions depended, to personal property responsibility (and under some conditions — and to the criminal liability [311]). Rules about such property responsibility are applicable basically in case of bankruptcy of corporation [312].

Typical examples of the fraudulent activity attracting attraction to specified responsibility, will be are cases «fraudelent trading» — continuation of economic activities with acceptance of debts in conditions, when there is no prospect of their return [313]. «Wrongful trading» takes place, when the company experiencing financial difficulties, but being in a condition to pay off with the creditors (though thus to its participants already remains nothing after distribution of actives), makes risky transactions to correct the financial position. If the risk is realised also position of creditors will worsen, it will entail negative consequences for risking persons.

To the group of risk which is coming within the purview of rules about responsibility, directors of the company (including shadow directors) [314] concern basically.

The tort. One more legal ground of attraction of supervising participants to "external" responsibility is a tort which name also the theory «the directing mind and will», or «identification». The typical example of such responsibility was showed in business «Stone and Rolls Ltd v Moore Stephens» [315]. In this business the unique participant and the director of the company has made a deceit (fraud) concerning creditors of the company, for as has been involved in «getting responsibility».

Nevertheless, would be wrong to contrast the tort to the doctrine of "removal of a corporate veil» (as it many lawyers in England), as do the tort as the basis of direct responsibility of participants of corporation it is almost always connected in such cases with a deceit (fraud), and it just and is one of primary factors of "removal of corporate covers».

Bringing an intermediate result, it is necessary to notice extreme nesklonnost English judges to doctrine application «getting responsibility» that speaks pressure "proinvestorskogo" precedent «v. Salomon and Co.» And also existence of alternative kinds of responsibility, mainly concepts of wrongful business management. The British jurists are not located to define the approach based on "penetration" as delictual, that is connected with a genetic problem of "removal of a corporate veil» (it is obliged by the origin to the equity law). In the English legal literature discussions concerning are led, whether the doctrine of "removal of corporate covers» only in a case when there are no all other remedies at law, or this unessential condition [316] should be applied. Dispute is based that confirm a number of judgements as that, and other point of view that speaks about a lacking general rules way of formation of regulation in this sphere, characteristic for the countries «case law» (the judicial precedent rights).


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A source: BYKANOV DENIS DMITRIEVICH. «GETTING RESPONSIBILITY» In the FOREIGN And RUSSIAN CORPORATE RIGHT. The dissertation on competition of a scientific degree of the master of laws. Moscow — 2018. 2018

More on topic «getting responsibility» in the English right:

  1. the Appendix 1. A small parametrical kernel of English language (by data «the English-Russian dictionary» V.K.Muller)
  2. Tugushev Rustam Rashidovich. Diminished responsibility: criminally-legal value and problems otgranichenija from responsibility and the limited responsibility. The dissertation on competition of a scientific degree of the master of laws. Saratov -,
  3. Chapter 2. Features of transfer of Russian and English diplomatic and administrative terminological lexicon XVI-XVII of centuries (on the basis of Russian and English diplomatic documents)
  4. 1.2. Professional responsibility as a civil responsibility version, its concept, signs and kinds
  5. similarities and differences of administrative responsibility for infringements in sphere of taxes and tax collections in the Russian Federation from other kinds of legal responsibility
  6. §3. Criteria of responsibility. Legal (psychological) criterion. The intellectual moment. Responsibility and free agency: history and the present.
  7. responsibility of directors of corporation and its responsibility Participants
  8. the International legal analysis of the concept of "divided responsibility» (shared responsibility) in a context of a liability of infringement of the obligations following from norms jus cogens
  9. §2. The legal nature of insurance of professional responsibility. A parity with indemnity against liability under the contract and otgranichenie from insurance of non-contractual responsibility of subjects of professionalwork
  11. the Chapter II. Tax responsibility as a kind of legal responsibility
  12. "behavioural" responsibility and responsibility owing to the fact Prevailing participation
  13. §2. Criteria of the limited responsibility. Medical criterion of the limited responsibility.
  14. §2. Criteria of diminished responsibility. Medical criterion of diminished responsibility.
  15. § 2. The English right
  16. a know-how legal regime in the English right
  17. English language