Bringing an action against an individual in a company

Clients often want to know whether they can bring an action against an individual involved in a company – a sole shareholder or director maybe – even though their contract was with the company.

This can be tricky. In English law, an individual is separate from the company and generally not liable for its wrongdoings. This is often described as ‘the corporate veil’. It is difficult to lift the veil and the protection it affords to the individuals behind the company.

In some circumstances, the courts have been willing to lift the veil. Most often this has been in cases where there has been fraudulent misrepresentation or deceit by an individual involved in the company. That said, even when the courts are willing to lift the veil there are still limits on the nature of the claim.

In the recent case of VTB Capital plc v Nutritek International Corp for example, the court found that a previous judgment, which had lifted the corporate veil to allow a claim in contract, had been wrongly decided.

If you want to ensure you have rights against key individuals involved in a transaction, a simple precautionary measure may be to join them as guarantors and parties to your agreement. A combination of thinking ahead and careful drafting may put you in a much stronger position should a contract go wrong.

As always, if you need commercial and pragmatic legal advice, we’re here to help so please get in touch.

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