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Lim: Formalism and Companies



Ernest Lim (University of Hong Kong – Faculty of Law) has posted “Formalism and Companies”, (2013) 13 Journal of Corporate Law Studies 477.

The abstract is as follows:

This article critically analyses two of the arguably most significant English corporate law cases in the last decade through the lens of two distinct conceptions of formalism. Deploying the first conception of formalism, this article assails the prevailing view that the House of Lords decision in Stone & Rolls v Moore Stephens was correctly decided because the fraud of the directing mind and will was also the company’s fraud. It will be argued that the court’s language of syllogistic and precedential inexorability is misleading: not only do the cases fail to lend support to the majority’s reasoning, it is contradicted by contrary authorities and policy arguments. Deploying another conception of formalism, this article challenges the view that the result in the Supreme Court case of In re Paycheck Services 3 Ltd was correct because the defendant was not a de facto director as he did not assume responsibility; this article advances a new justification for the majority’s decision. It will be argued that the key to understanding the court’s decision is whether a court should have the jurisdiction to determine whether and when the rule of separate legal personality should be followed or departed. This article concludes by observing how formalism can explain the significance of and similarities in both cases.

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