In Nicholas Eng Teng Cheng v Government of the City of Buenos Aires [2024] SGCA 15, the Singapore Court of Appeal considered the proper law to determine whether to lift the corporate veil of a Singapore-incorporated company that entered into a contract governed by foreign law – is it the law of incorporation or the governing law of the contract?
The respondent brought a claim against a Singapore-incorporated company and the appellant-controller for breach of contract. At first instance, the Judge allowed the claim and found the company and appellant jointly and severally liable for damages. The appellant was held personally liable on the premise that the governing law of the contract, Argentine law, determined whether the corporate veil should be lifted.
The appellant appealed that decision and contended that the Judge ought to have applied the law of incorporation, which was Singapore law.
The Court of Appeal allowed the appeal on the basis that the law of incorporation, Singapore law, should apply, and that under that law, the company was not the appellant’s alter ego, and there was therefore no basis to lift the corporate veil.
The Court of Appeal explained that, as the law of incorporation confers upon the company its separate legal personality and its attendant rights and liabilities, it must be that law which creates the exceptions to the separate entity rule. The jurisdiction in which a company is incorporated has a paramount interest in maintaining the corporate structure and in regulating the situations where the corporate veil ought to be pierced. The Court of Appeal expressed the view that applying the law of contract to the lifting of the corporate veil may lead to “governing law shopping”, which would be undesirable.
However, where the interests of justice render it necessary, the law of the forum or another more appropriate law may be applied in considering corporate veil lifting.
The Court of Appeal held that the exception of lifting the corporate veil applies:
(a) When the law of incorporation is the appropriate governing law, and that law allows for the lifting of the corporate veil in that case; or
(b) Where the lifting of the corporate veil is unavailable under the law of incorporation, but the Court nonetheless wishes to do so as a matter of its policy:
- If the law of incorporation is the same as the law of the forum, the Court cannot create exceptions to separate corporate personality, not recognised by the law of incorporation (which must be taken to have encompassed all relevant policy concerns); and
- If the law of incorporation is some other law, and the Court considers that a liability has been shielded by using a company subject to that law (which does not permit the lifting of the corporate veil), the Court may nevertheless lift the corporate veil by applying the law of the forum.
