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Extra resources for Company Law Concentrate: Law Revision and Study Guide
The veil will only be pierced where the fraud or wrongdoing in question is within the ordinary business of the company in question. However, in the following case, the Supreme Court overruled Gramsci on this point and held that the puppeteer would not be bound. VTB claimed that once the veil was pierced, the defendants would become party to the original loan agreement between VTB and RAP, and so would be liable on it. The general rule was stated by Roskill LJ in The Albazero  when he stated that it was ‘long established and now unchallengeable by judicial decision … that each company in a group of companies … is a separate entity possessed of separate legal rights and liabilities’.
The adoption was therefore invalid. 21) Key debates Topic Promotion of the company Author/Academic Joseph H Gross Viewpoint Discusses the courts’ approach in determining whether or not a person is a promoter. ’ (1970) 86 LQR 493. Topic Preincorporation contracts Author/Academic Joseph Savirimuthu Viewpoint Discusses the theories behind the common law and statutory rules relating to pre incorporation contracts, and provides several possible suggestions for reform. ’ (2003) 24 Co Law 196. ’ Discuss the validity of this statement.
This clearly benefits third parties who contract with the promoter, as they will be able to sue the promoter should the terms of the preincorporation contract be breached. Looking for extra marks? In Braymist Ltd v Wise Finance Co Ltd , it was held that a promoter could sue a third party, but the fact that judicial clarification was required demonstrates a flaw in the drafting of s 51 that you might wish to bring up in a possible essay question on the effectiveness of s 51. This process of substituting one contract with another is known as ‘novation’.