Companies and Directors

[Version WEB 1 Published December 2009]

Companies and Directors

This section outlines the provisions of the Companies Act 2006 (CA 06) and

the Company Directors Disqualification Act 1986 (CDDA) which relate to

fraudulent trading and other offences. It also covers the duties of directors.

The CA 06 amends and restates many of the provisions of the Companies Act

1985. The majority of the CA 06 was brought into force between the 1st

October 2007 and the 1st October 2008. A small number of the provisions of

the Companies Act 1985 (CA 85), principally relating to company

investigations, will remain in force.

Section 1(1) of the CA 06 defines a company as an entity created under the

CA 06 or under a former UK Companies Act.

Piercing the corporate veil

Corporate legal entity

A company is a legal entity separate and distinct from its members.

This principle extends to a group of companies, where each company in a

group is considered a separate legal entity possessed of separate legal rights

and liabilities: Re Polly Peck International (No 3) [1996] 2 All ER 433.

There may be circumstances where the wording of a particular statute or

contract justifies treating the parent and subsidiary as one company, at least

for some purposes; or where special circumstances exist indicating that the

corporate structure is a mere façade concealing the true facts and as such the

court will be able to ‘pierce the corporate veil’ to get to the truth, Adams v

Cape Industries plc [1990] Ch 433.

In Trustor AB v Smallbone (No 2) [2001] 1 WLR 1177, the court held that it

was entitled to pierce the corporate veil, thereby recognising the receipt of a

company as that of the individual in control of it, if the company had been

used as a device to avoid any liability of that individual. It was, however,

insufficient that the company had been involved in some impropriety, not

linked to the use of the company structure, to