Candidates are required to write 2500 words on the topic given below Candidates ate required to analyse the argument put below and either Justify or refute Your argument either way (for or against)...

Law
Business Law
Corporate veil
Law
Introduction
Corporate veil refers to the veil or translucency created in a joint stock company due to there
eing a gap between the ownership and the management. This also creates conflict of interest.
The fact that there remains a difference in the interests of the top managers and the shareholders
esults in the possibility of misuse of funds and management powers (Fletcher, Keith L, 2009). It
can result in misappropriation of the fund of the shareholders. In such cases where there is a
misuse of funds, the court of law has the right to pierce through the corporate veil and ask the
managers to present all of the financial and non financial records and documents in order to
ensure that the firm is acting within its powers and rights as well as intention and purpose
(Fa
ar, J., 2009). This helps create better levels of transparency which becomes crucial in case
of there not being any other way for the shareholders to ensure that their rights as well as
interests are protected. In this way the corporate veil forms a very essential element of business
law and company law as it helps ensure that there are fair and just practices followed in the
organization and that the shareholders, who happen to be the true owners of the firm are not
deprived of their rights (Fa
ar, J., 2008).
Analysis of the statement
The statement, “The threshold problem arises from the fact that there is no common, unifying
principle which underlies the occasional decision of the courts to pierce the corporate veil”
explains that there are several reasons for which the corporate veil may be lifted. It results in
there being confusion and dilemma over the court’s judgment and for the court to decide if it
should lift the corporate veil or not (Hinchy, R. & McDermott,, 2009). As the records of the firm
are not public documents and may result in the competitor’s gaining knowledge about the
strategies and other details of the firm, it becomes crucial for the court to order the lifting of the
corporate veil if and only if it is extremely essential and not otherwise (Milman & Flanagan,
1983). This statement indicates a loophole in the law of lifting of corporat3e veil as there is no
common and unifying principle which can help understand the nature of instances which can
esult in lifting of the corporate veil. This makes it very difficult to be able to adjudge the
ighteousness of a court’s decision to lift the corporate veil (Hinchy, R. & McDermott, 2009).
Law
This statement explains that if there is no standardization of causes for piercing of the corporate
veil, then it reduces the transparency in the court’s decisions resulting in lots of problems with
the processes of the court itself. It results in several issues and also forms the causation of
manipulations with the courts processes as several companies’ reason out as to why they should
e excused from the piercing of the corporate veil (Caroll, 1999). This helps in the formation of
malfunction in a transparent system and also leads to several shareholders as well as joint stock a
company not trusting the system of legal decisions where in the corporate veil needs to be
pierced. In this way as there is no unifying principle lying as a basis for the occasional decision
of the court (Te
y, A. & Giugni, D., 2009).
The sentence rightly depicts that there could be several issues that can arise due to lack of
standardized interpretation and meaning adjoined to this law which in the long run may prove
detrimental as firms may discover loopholes and misuse it in order to take maximum advantage.
So it becomes extremely essential to formulate appropriate underlying unified principles which
can help in the process of implementation of this law (Fletcher, Keith L, 2009).
Support for argument
I do support the argument and do believe that it is essential that there be unified principles
guiding piercing of the corporate veil. Managers should act in the Stockholders interest and so
agency problems need to be resolved. The problems that arise due to differences in the objectives
of the management and the owners or the shareholders of a company are known as principal-
agent problems. It includes the fact that managers focus on profit maximization, where as
shareholders require wealth maximization. This problem can lead to frauds and misleading of the
shareholders and several other stakeholders (Hinchy, R. & McDermott, 2009).
It has become very essential in the present times that there be appropriate principles formulated
for piercing of corporate...