View/Open - Research Commons - The University of Waikato

It would seem that the English courts are still leaning towards the separate legal
entity doctrine and refusing to lift the veil in the absence of fraud. Since the decision
in Adams v Cape Industries, 177 it seems that the courts in England are restricting
circumstances to lift the corporate veil. By insisting on special circumstances in
addition to creating justice, the courts have placed a burden on parties who wish to
lift the veil to show elements of fraud or a mere façade concealing true facts. Lord
Wedderburn wrote "is it not time to know just when a company is a 'sham' and when
the veil of corporate personality can be torn aside?" 178 and until today, more than
twenty years later, the answers remain uncertain.
5.2.3.3.4 Malaysian Approach
In Malaysia, the principle of separate legal entity is found in section 16(5) of the
Companies Act 1965 179 and the courts are reluctant to alter the principle. The courts
in Malaysia have been influenced by the English decisions on this matter. This is
evident from the courts‟ reluctance to lift the corporate veil on a group of companies
except in limited circumstances. The courts are prepared to lift the veil in cases
where fraud is alleged and also in circumstances where justices demand such an
action.
In Tay Tian Liang v Hong Say Tee & Ors, 180 the court considered whether it was
necessary to lift the corporate veil to unveil the existence of a wholly-owned
177 [1990] Ch. 433
178 Wedderburn “Multinationals and the Antiquities of Company Law” (1984) 47 MLR 87 at 90.
179 Section 16(5) of the Malaysian Companies Act 1965 provides that: “On and from the date of
incorporation specified in the certificate of incorporation but subject to this Act the subscribers to
the memorandum together with such other persons as may from time to time become members of
the company shall be a body corporate by the name contained in the memorandum capable
forthwith of exercising all functions of an incorporated company and of suing and being sued and
having perpetual succession and a common seal with power to hold land but with such liability on
the part of the members to contribute to the assets of the company in the event of its being wound
up as is provided by this Act"
180 [1995] 4 MLJ 529 at 541.
110