UK: Piercing The Corporate Veil: Supreme Court Clarifies The English Law Position

Last Updated: 25 September 2013
Article by Denys Hickey and David Richards

Prest v. Petrodel [2013] UKSC 34

The Supreme Court has recently issued a decision confirming that English law permits a claimant to ignore the separate legal identity of a company, and "pierce the corporate veil" in certain circumstances. However, this remains an exceptional remedy.

The background facts

Prest v. Petrodel came before the Supreme Court on appeal from a decision in a divorce case. Michael and Yasmin Prest married in 1993 but the marriage ended in 2008. Mr Prest was a wealthy oil trader who had previously worked for Marc Rich and later went into business on his own account, operating through a number of companies over which he had complete control (the "Companies"). The Companies had legal title to real estate within the UK, including the couple's matrimonial home.

In the divorce proceedings Mrs Prest obtained an order from the family courts requiring her husband to pay her a lump sum of £7.5 million plus annual payments. To satisfy this judgment, the Judge ordered the Companies to transfer title to the marital home and seven other properties. The Judge based this order on Section 24 of the Matrimonial Causes Act which provides that the court may order that "a party to the marriage shall transfer to the other party... such property as may be so specified, being property to which the first-mentioned party is entitled...". The Judge also decided that the matrimonial home was held by one of the Companies on trust for Mr Prest, who was the beneficial owner of the property.

Importantly, the Judge in the High Court recognised that the companies had a separate legal personality from Mr Prest, as they were not being used for an improper purpose, and the Court of Appeal agreed. It is this point that is of significance in a commercial context and is the focus of this article.

Saloman v. Saloman

The starting point for a legal analysis is the case of Saloman v. Saloman in 1897. Mr Aron Saloman was a sole trader who set up a limited liability company ("A. Saloman & Co Ltd") through which he conducted his leather and boot making business, in which Mr Saloman and certain members of his family were the only shareholders. When the business failed, the creditors sought to hold Mr Saloman personally liable for the debts of his company.

At first instance, the High Court held that the company was effectively just Mr Saloman in another form. The Court of Appeal agreed and also considered that Mr Saloman was using the company as "a device to defraud creditors". The House of Lords, however, did not consider that there was any fraud, and held that the company was a separate legal person from Mr Saloman and that he was not therefore liable for the company's debts. As Lord Sumption said in Prest: "The separate personality and property of a company is sometimes described as a fiction, and in a sense it is. But the fiction is the whole foundation of English company and insolvency law."

What is "piercing the corporate veil"?

It has long been established that the courts can in certain circumstances disregard the separate legal personality of a company from the shareholders. This is known as piercing or lifting the corporate veil. Numerous cases have set out various legal tests for the very limited circumstances in which this doctrine may be invoked by the courts, but the principles on which the courts can do so are not clear.

The first point to be dealt with in Prest was whether English law recognises the concept of piercing the corporate veil at all. Earlier in 2013, the Supreme Court in VTB v. Nutritek heard argument that there is in fact no principle of law which allows a court to disregard the separate legal personality of a company. The Supreme Court in VTB expressed some support for that argument, but held that they did not need to decide the point. In Prest, the majority of the members of the Supreme Court, however, confirmed that the doctrine of piercing the corporate veil is a well-established one.

When can a court pierce the corporate veil?

In Prest, Lord Sumption attempted to clarify the doctrine as follows:

1. The term "piercing the corporate veil" means disregarding the separate personality of a company and occurs when the court applies an exception to the rule in Saloman v. Saloman.

2. The doctrine can be distinguished from a situation where the law attributes the acts of a company to those individuals who control it, but without disregarding the company's distinct legal personality.

3. Lord Sumption identified two scenarios where there is some form of wrongdoing which might lead to the person in control of a company being held liable:

a. The first is the "concealment principle" which Lord Sumption considered did not in fact involve piercing the corporate veil. This is where a company or companies are interposed in a transaction so as to mask the true principals to the transaction. In other words, the parties attempt to employ a "façade" to disguise their activities. In such cases, the Court does not disregard a company's separate legal existence, but unveils the true facts which the corporate structure is designed to conceal.

b. The second is the "evasion principle". The Court may disregard the separate legal personality of a company if there is a legal right against the person in control of the company and the company is deliberately interposed in order that the separate legal personality of the company should defeat the enforcement of that right against the controlling party. The Court may then pierce the corporate veil, but only for the purpose of depriving the company or its controller of the advantage they would have obtained by reason of the company's separate legal personality.

The principles enunciated by Lord Sumption and endorsed by Lord Neuberger were not entirely accepted by the other five members of the Court, and this analysis therefore represents a minority view. The majority of the members of the Court were reluctant to define the scope of the doctrine at all, with Lord Mance stating his view that it is "often dangerous to seek to foreclose all possible future situations which may arise and I would not wish to do so." Nonetheless, the above principles are the clearest modern statement from the highest Court in England and Wales as to when a court may pierce the corporate veil, and they are likely to be highly persuasive in future cases.

Outcome for Mrs Prest

Having defined the relevant test, the Supreme Court unanimously agreed with the Judge in the High Court that it was not permissible to pierce the corporate veil on the facts of this case. The Judge at first instance had not found any relevant impropriety on the part of Mr Prest. Although Mr Prest had acted improperly in many ways (for example, by misapplying the assets of the Companies for his own benefit) he was not concealing or evading any legal obligation owed to his wife. In particular, it was relevant that the legal title to the properties was vested in the Companies before the marriage broke up. It could not be said that Mr Prest was using the Companies to evade his obligation to pay the divorce settlement to his wife.

The Court, however, found that the properties, whilst legally owned by the Companies, were in fact beneficially owned by the husband and so could be transferred to the wife.

Protection of assets

Prest upholds the principle established in Saloman v. Saloman that assets which are held within corporate structures will not be considered to be the property of the controller of the company unless it is possible to rely upon the evasion principle.

The Prest decision does, however, demonstrate that a court has other tools at its disposal where it wishes to ensure that a wrongdoer cannot create an artificial façade and hide behind the separate legal personality of a company. In Prest, the Court inferred that the Companies held the UK properties on trust for Mr Prest. In reaching this conclusion, Lord Sumption observed that many of the Companies were not actively trading, that the Companies could not have funded the purchase of the properties they owned and that ownership of the property had nothing to do with the business of oil trading.

While it is not possible to be precise about the circumstances in which a court will seek to look behind the separate legal personality of a company, Prest suggests that this is most likely to occur where a court is convinced that the doctrine is being used for an improper purpose. Mr Prest was using the companies under his control to run his personal affairs, and as his own money box. By contrast, the legitimate use of corporate structures for asset planning and distribution of risk and liabilities should not be affected by the decision.

The decision does, however, show that individuals need to be careful about how they structure their affairs, and how they exercise control over companies, if they want to protect their assets from claimants. The courts can be inventive in finding a justification to ignore the separate legal personality of a company in order to deal with an illegitimate attempt to hide behind a company structure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.