the subscribers, as members liable, in any shape or form, except to the extent and in the manner provided by the Act" (Companies Act 1862). The Lords concluded that the Act permitted the creation of limited liability corporations so as to facilitate the creation of wealth beyond the reach of the creditors of insolvent corporations. In other words, an individual could not place himself immune from liability for his debts, except by filing for bankruptcy, but a company could, up to the amount of its minimum capital and the Commons so intended. Lord McNaghten said at p. 51 that "among the principal reasons which induce persons to form private companies . . . one is their desire to avoid the risk of bankruptcy, and the increased facility afforded for borrowing money."
Subsequent case holdings have largely been consistent with that of Salomon, except where the discretion of the courts has been limited by statute, such as by sec. 485 of the Company Act 1985, sec. 214 of the Insolvency Act of 1986 and other statutes imposing liability on controlling shareholders and/or directors for various types of fraud against creditors or other investors. Justice Cooke labeled these decisions "some gnawing away at the edges of doctrine," sec. 2.2 (Comparative).
In those cases, the courts have adhered rigorously to form. As it noted in Adams v. Cape Industries PLC [1990] Ch 433, C.A. (discussed below), the key factor in the courts' unwillingness to pierce the corporate veil was whether "the corporate forms applicable to [the company whose veil might have been pierced] as a separate legal entity were observed" (474). The penchant of the courts for ignoring underlying economic realities in favor of a highly formalistic approach was expressed by Lord Goff in Bank of Tokyo Ltd. v. Karou [1987] A.C. 45 as follows: "economically . . . they [the companies in question] were one. But we are concerned not with economics but with law."
English courts have ...