Lifting the corporate veil in Ireland: Salomon and the exceptions

The principle

Incorporation creates a new legal person. The company owns its property, makes its own contracts and owes its own debts. Its members risk only what they have agreed to contribute, and they have no legal or equitable interest in the company’s assets. Controlling a company, even owning every share, does not make its property yours or its debts yours.

The rule comes from Salomon v A Salomon & Co Ltd [1897] AC 22 UK · House of Lords. There the House of Lords held that a duly incorporated company is a different person from its subscribers, even where one person holds almost all the shares, and is not their agent. English decisions are persuasive, not binding, in Ireland, but the Supreme Court has adopted this one without reservation. In Allied Irish Coal Supplies Ltd v Powell Duffryn International Fuels Ltd [1997] IESC 11 IE · Supreme Court, Murphy J called Salomon the cornerstone of company law. The Court refused to treat a parent and its trading subsidiary as one economic entity liable for the subsidiary’s debts.

“Lifting the veil” is a loose label for the exceptions, which fall into two groups.

• Statutory exceptions. The Act makes particular people liable in particular circumstances, usually in an insolvency.
• Common-law grounds. These are narrow. The courts have repeatedly refused to disregard a company merely because justice seems to demand it.

Statutory basis

Separate personality (section 25)

Section 25(1) makes the subscribers and members a body corporate with perpetual succession from the date of incorporation. Under section 25(4), the certificate of incorporation is conclusive evidence of due registration.

Company names on business documents (sections 47 and 49)

Section 49 requires the company’s name to appear on its business letters, notices, cheques, bills, invoices and similar documents. Under section 47(3), an officer who signs a bill of exchange, promissory note, cheque or order for money or goods without the name shown in that way is personally liable to the holder. The officer escapes liability only if the company pays, or if the court considers that no injustice will result from imposing the liability on the company.

Related companies in liquidation (sections 599–600)

Where a company is being wound up, section 599 lets the court order a related company to contribute to its debts. Section 600 lets the court order related companies that are all being wound up to be wound up together as if they were one company. Each order must be just and equitable. The court weighs listed factors: the related company’s part in management, its conduct towards creditors, and how far the collapse is attributable to it. The relationship alone is never enough.

The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 changed s.599 with effect from 1 July 2024. It deleted the former section 599(5), which made attributability a precondition, so attributability is now one factor among others.

Accounting records (section 609)

Section 609 applies where a company in insolvent liquidation failed to keep proper accounting records under sections 281–285. If that failure contributed to its inability to pay its debts, caused substantial uncertainty about its assets and liabilities, or substantially impeded the winding up, the court may make the officers in default personally liable for its debts.

Fraudulent and reckless trading (section 610)

Section 610(1) has two limbs:

• reckless trading, which applies to a person who, while an officer, was party to carrying on the business recklessly;
• fraudulent trading, which applies to any person knowingly party to carrying on the business with intent to defraud creditors or for any fraudulent purpose.

The court may declare that person personally responsible, without limit, for all or part of the company’s debts.

Section 27 of the 2024 Act made three changes from 1 July 2024:

• it removed the word “knowingly” from the reckless-trading limb;
• it changed the test in section 610(3)(a), so that an officer who ought to have known that his or her actions would be likely to cause loss to creditors may now be found to have traded recklessly;
• it replaced the old “acted honestly and responsibly” relief in section 610(8). The court may now relieve a person who took reasonably practicable steps to minimise loss from the time he or she knew, or ought to have known, that loss was likely.

Key authorities

• Salomon v A Salomon & Co Ltd [1897] AC 22 UK · House of Lords — a company is a different person from its members, even where one person holds nearly all the shares.
• Allied Irish Coal Supplies Ltd v Powell Duffryn International Fuels Ltd [1997] IESC 11; [1998] 2 IR 519 IE · Supreme Court — a properly run subsidiary is separate from its parent, which is not liable for its debts merely because it controls and finances it. The Court distinguished Power Supermarkets Ltd v Crumlin Investments Ltd (High Court, Costello J, 22 June 1981, unreported).
• Powers v Greymountain Management Ltd (in liquidation) [2022] IEHC 599 IE · High Court — the veil was pierced where a company existed only as an instrument of fraud. Shadow directors who syphoned off its funds were made personally liable to a defrauded investor. The court relied on the earlier High Court statement in Dublin County Council v Elton Homes Ltd [1984] ILRM 297 that fraud or syphoning off funds might justify lifting the veil.
• Re PSK Construction Ltd [2009] IEHC 538 IE · High Court — this case was decided under the predecessor reckless-trading provision. A director found party to reckless trading was made liable for an amount proportionate to the wrongdoing, measured by the losses incurred while the company should already have been wound up.
• Toomey Leasing Group Ltd v Sedgwick [2016] IECA 280 IE · Court of Appeal — under the old reckless-trading deeming provision, the loss to the creditor had to be foreseeable to a high degree of certainty, not merely possible. The 2024 wording, “would be likely to cause loss”, reads on its face as a lower threshold.
• Powerkids Entertainment (Singapore) Pte Ltd v Adenwala [2023] IEHC 673 IE · High Court — declarations under sections 609 and 610 against three directors, who were made jointly and severally liable for the company’s debts.
• Prest v Petrodel Resources Ltd [2013] UKSC 34 UK · Supreme Court — this decision is persuasive in Ireland. It recognises a limited “evasion” principle: the court may pierce the veil where a person deliberately interposes a company to evade an existing legal obligation, but only to remove the advantage gained. The veil was not pierced in that case.

How it is examined

Separate personality and the veil come up in undergraduate papers, the King’s Inns and FE-1 examinations and the QLTT, in three usual forms:

• an essay on whether Irish law pierces the veil on any coherent basis;
• a problem about a failed company whose director kept trading, kept poor records or signed documents without the company name;
• a problem about a group, where a creditor or liquidator of an insolvent subsidiary wants to reach the parent.

A strong problem answer works in this order:

1. The rule. Section 25, Salomon and Allied Irish Coal Supplies.
2. Statute first. Section 47(3) for signed instruments; in a liquidation, sections 609 and 610 against officers, and sections 599–600 against related companies.
3. Dates. Say whether the post-1 July 2024 wording of sections 599 and 610 applies.
4. Common law. Fraud or asset-stripping (Greymountain); groups (Allied Irish Coal Supplies); evasion (Prest, persuasive only).
5. Extent. Liability should be proportionate to the wrongdoing (PSK).

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