Departing from the legal substance of transactions in the corporate field: the Ramsay Approach beyond the tax sphere

Transactions designed to avoid statutory provisions bear the legal risk that courts deem them unsuccessful. As this legal risk is a function of the approach courts adopt towards them, identifying and understanding it fully is a sine qua non requirement, without which one simply cannot assess the risk ex ante. Confidence in the robustness of such transactions is based partly on the fact that UK courts characterise transactions according to their legal substance, ignoring factors such as economic substance. Courts have developed an approach in the tax field, the so-called “Ramsay Approach”, which can lead them to look beyond legal substance, but the view seems to be held in some quarters that it cannot be applied outside the tax field. It is argued here that, once its true nature is properly understood, this approach not only can but actually has been applied in a number of corporate law cases.