The Circumstances Under which the Corporate Veil Can be lifted and A Critical Analysis of How Effective the Law in Trinidad and Tobago is in Piercing the Corporate Veil

Abstract

The principle of separate legal personality and the existence of the legal fiction known as the ‘corporate veil’ was established in 1897. With the passage of time, the principle has adapted and evolved, resulting in situations where the courts disregard the principle and pierce the corporate veil. This paper seeks to examine the circumstances under which the corporate veil can be lifted and to critically analyse how effective the law is in piercing the corporate veil within the context of Trinidad and Tobago.

Doctrinal research was conducted using cases from the Supreme Court of Judicature of Trinidad and Tobago. The cases were analysed to determine how the courts at first instance, the Court of Appeal and the Privy Council, treated with the issue of piercing the corporate veil.

The research revealed that the circumstances under which the corporate veil can be pierced are heavily fact dependent and based on the nature of the pleadings and the demeanour of the witnesses in cross examination. Furthermore, the legislative provisions in Trinidad and Tobago lack penalties or sanctions so directors do not face the full extent of the law for engaging in improper conduct and are not held accountable for their actions.

Consequently, legislation in Trinidad and Tobago should be amended to reflect penalties for a breach of directors’ duties. Furthermore, legislation relating to directors’ conduct should be periodically amended, updated and expeditiously proclaimed so that should a court declare that the corporate veil is pierced directors can be prosecuted for their improper conduct.