A company has been established as a separate legal entity in the case of Salomon[1], and courts have further elaborated on the corporation being its own right and duty-bearing unit as a person in the subsequent cases of Macaura[2] and Pharmaceutical Society[3]. A corporation is a distinct entity from its shareholders and directors to protect them from the corporation’s liabilities.[4] Limited liability allows individuals to invest in corporations without risking their personal assets, thus encouraging investment and business ventures.[5] This principle was particularly prevalent during the 19th century, a time marked by laissez-faire economic policies and a push for freedom in commerce.[6] This paper will argue for upholding the Separate Legal Entity Principle and disregarding the doctrine of piercing the corporate veil.

Protecting the corporation as a separate legal entity is a matter of policy consideration recognized by the Court in Rainham Chemical Works v Belvedere Fish, where Lord Buckmaster stated that the essence of the Companies Act is that a person may substitute their unlimited liability with the limited liability of a company so that they may encourage enterprise.[7] Furthermore, Salomon’s separate legal entity principle has encouraged contracting parties and creditors to acknowledge the risk of doing business with a corporation and arrange adequate security or guarantees to protect themselves from the company’s insolvency.[8]

The recent case of VTB Capital upheld that the veil cannot be pierced to make the controller of a company liable for the company’s contract. RAP, a Russian company, defaulted on its loan from the Russian bank VTB Capital, which RAP obtained purportedly to purchase dairy farms from Nutritek, a company with shared ownership with RAP, in a scheme to defraud VTB.[9] Despite the loan agreement having an English jurisdiction clause, VTB sought to include the........

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