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Piercing the Corporate Veil, or ‘Alter Ego’ liability, in the Cayman Islands, Bermuda, and the British Virgin Islands

Creative attempts to ‘pierce the corporate veil’ sometimes come before the Courts of Bermuda, the British Virgin Islands, and the Cayman Islands.

In some cases, an attempt is made to establish personal liability on the part of a company’s individual owners or controllers, for the liabilities, acts or omissions of the company itself.

In other cases, an attempt is made to establish liability on the part of a company for the separate liabilities, acts or omissions of the individuals that control or manage the company’s affairs.

In many such cases, the issue of corporate ‘veil piercing’ arises for consideration well before trial, since it can be particularly significant in the context of freezing injunction applications, as well as on the issue of jurisdiction. The issue can also become important, after trial, in the context of applications to enforce judgments and arbitration awards against related corporate entities.

It has been judicially recognised, of course, that there are only very ‘limited circumstances’ in which the corporate veil may actually be ‘pierced’ or ‘lifted’ by a Court as a matter of law.

Those circumstances usually require clear evidence of fraud and dishonest evasion of pre-existing liabilities through the abuse, or misuse, of the corporate structure.

‘Piercing the veil’ successfully, therefore, is not an easy task for a claimant or judgment creditor.

But it is not necessarily impossible, however, especially in cases of fraud where the evasive conduct is shown to be egregious.

The law in this area also remains under review at an appellate level, as illustrated by the recent May 2021 decision of the United Kingdom Supreme Court in Hurstwood Properties (A) Ltd & Ors v Rossendale Borough Council [2021] UKSC 16.

As Lord Briggs and Lord Leggatt recognised in their recent judgment in that case, “talk of ‘piercing the corporate veil’ is a metaphor that is liable to obscure more than it illuminates”. Lord Briggs and Lord Leggatt also noted that, despite Lord Sumption’s attempts to rationalise this area of the law into a coherent set of principles in his judgment in Prest v Petrodel Resources Limited [2013] UKSC 34, they nonetheless shared the doubts of other judges that “piercing the corporate veil” was even a ‘coherent principle or rule of law at all”.

 

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Piercing the Corporate Veil, or ‘Alter Ego’ liability, in the Cayman Islands, Bermuda, and the British Virgin Islands

 


Alex Potts QC
Partner, Head of Cayman Islands Litigation & Restructuring

Cayman Islands   +1 345 814 7394


Rhys Williams
Director

Bermuda   +1 441 298 7832



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