Lifting the veil of incorporation company law pdf

In other words, where a fraudulent and dishonest use is made of the legal entity, the individuals concerned will not be allowed to take shelter behind the corporate personality. In vibelko nig ltd v nigerian deposit insurance corporation, the court of appeal held that notwithstanding the use of shall in the paragraph of the act, the veil of. However, obviously this opens up the possibility of abusing the corporate form and so a necessary part of company law is to allow the court to lift the veil when appropriate. Lifting of the corporate veil means disregarding the corporate personality and looking behind the real person who are in the control of the company.

The principle of veil of incorporation is a legal concept that separates the personality of a corporation from the personalities of its shareholders and protects them from being personally liable for the company s debts and other obligations. Whilst there is a general reluctance to lift the corporate veil, there is a body of case law where the courts have considered doing so. Jun 12, 20 company law lifting of corporate veil with reference to leading case shagun singh 15. Introduction incorporation of a company casts a veil over the true controllers of the company, a veil through which the law will not usually penetrate. The law on when a court may disregard this principle by lifting the corporate veil and regarding the company as a mere agent or puppet of its controlling shareholder or parent corporation follows no consistent principle. Ltd v tower hamlets lbc30, to allow an incorporated club to be treated as an. A descriptive study on the doctrine of lifting of corporate veil.

It continues to be one of the most litigated and most discussed doctrines in all of corporate law. Corporation, veil of incorporation, lifting the veil, separate legal. There are situations where the court will lift the veil of incorporation in order to. Also, the courts are always ready to lift the veil of incorporation where. Incorporation of an organization by registration was presented in 1844 and the precept of limited liability of an organization followed in 1855. Lifting or piercing of corporate veil circumstances in. In other words, the company alone is liable for all the acts done and the debts incurred by it and not the directors or the shareholders who are in fact the beneficial owners of the company. Understanding the veil of incorporation psf accounting. This principle may be referred to as the veil of incorporation. Lifting of corporate veil academike lawctopus for law.

The company is treated as in some degree identified with its members or directors or. One of the main motivations for forming a corporation or company is the limited liability it offers its shareholders. It is trite law that a rather hefty veil is drawn between these two that can be lifted only in a. Pdf once a company is incorporated, it enjoys, by the power of the law. This is commonly referred to as lifting the corporate veil. Popup annotation has a missing or invalid parent annotation. The company, in the contemplation of law, is a person distinct from the shareholders. Doctrine of lifting of corporate veil law firm in india. Read lifting the veil of incorporation under common law and statute, international journal of law and management on deepdyve, the largest online rental service for scholarly research with thousands of academic publications available at your fingertips. The effect of lifting or piercing the corporate veil is that the shareholders, rather than the company, are regarded as the relevant. Lifting of corporate veil with reference to leading cases. There is a dearth of overarching guiding principles for a body of largely incoherent case law. Lifting is also known as peeping, penetrating, piercing, or parting. Salomon sons wanted to become a partner within his business thus led to salomon incorporating his business as a limited company.

Apr 08, 2015 in the doctrine of lifting the corporate veil, the law goes behind the mask or veil of incorporation in order to determine the real person behind the mask of a company. C mitchell, lifting the corporate veil in the english courts. The aim of the paper is to explore recent case law in order to determine whether courts have moved away from an overly restrictive approach when dealing with cases relating to the corporate personality. The researcher tries to study about doctrine of lifting of c orporate veil, to study about law of piercing the veil to determine the reasons for judicial disregard. Pulling back the curtains separate legal personality and.

The companys act kenya 2015 seems to ignore the possibility of lifting the corporate veil to make members of a company liable for the company s wrongs. The rationale behind this is probably that the law will not allow the corporate form. Pdf lifting of corporate veil or disregarding of the corporate personality is common buzz in the modern corporate arena. A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company s debts and other obligations. Natal the dissertation is submitted in partial fulfilment of the requirements for the degree of master of laws, by coursework, faculty of law, university of natal. The law recognizes that a company is a separate legal entity distinct from its shareholders. Abuse of the separate legal personality separate legal personality. A critical analysis of common law principles in lifting the corporate veil.

Consequently, a companys liabilities are its own, not those of its shareholders. It is not barred under corporate law to have a subsidiary company. Lifting the veil of incorporation chancery law chronicles. Introduction the lifting of corporate veil doctrine remains one of the most difficult areas of hong kong company law. Lifting the corporate veil academike lawctopus for law. In this article, ashwini gehlot of institute of law, nirma university discusses lifting of the corporate veil. The separate legal of a corporate entity personally is viewed as a veil of incorporation, which prevents outsiders taking legal action against company members, even though the outsiders can. Lifting of corporate veil part 1 by bhanu pratap duration. By using real life examples, discuss and explain why the concept of lifting the veil of incorporation is of imperative importance. However, in certain situation, a court may ignore the separate legal personality of a company and look at the members or controllers of the company and make them liable for the debts of the company. Company law lifting of corporate veil 5 piercing of corporate veil piercing the veil is corporate law s most widely used doctrine to decide when a shareholder or shareholders will be held liable for obligations of the corporation. Salomon v salomon involved the principle of separate corporate personality. Lifting the veil of incorporation wmh law corporation.

Company avoiding legal obligations where the use of an incorporated company is being made to avoid legal obligations, the court may disregard the legal personality of the company and proceed on the assumption as if no company existed. Refer to circumstances where the law or the court disregard the corporate entity by looking behind it to determine the reality of a. Lifting the veil judicial exceptions statutory exceptions company. The incorporation of a company creates a separate person in law. The court on lifting the veil of incorporation concluded that the transaction was not made in the interests of the company, but in the interests of the directors and therefore is a sham. The lifting of corporate veil doctrine in hong kong. Instead, attention is given to making directors and other officers liable for. Jun 15, 2016 also the connection between the judicial pronouncements of two separate cases regarding lifting of veil of a corporate entity cannot be ascertained as every courts view on lifting of corporate veil depends on the facts of each case. In the doctrine of lifting the corporate veil, the law goes behind the mask or veil of incorporation to determine the real person or group of people behind the company. However, business owners can still be liable for business activities if they failed to follow corporate guidelines, commingled assets or acted recklessly. The courts according to gowers common dictum would lift the veil when the. The veil of incorporation law essays essay sauce free. The concept lifting the veil of incorporation essay. Lifting the veil can be used to impose liability upon the shareholders or for other purposes, such as ascertaining appropriate jurisdiction.

In my view, the principle that the court may be justified in piercing the corporate veil if a company s separate legal personality is being abused for the purpose of some relevant wrongdoing is well established in the authorities. Questions and answers mrl bachelors of law llb 98680. Prest decision in the light of the economic analysis of the company s limited liability. An anatomy of the grounds of lifting the corporate veil. Purpose the paper examines case law and statutory provisions related to lifting the corporate veil. Oct 08, 2019 indian legal system civil laws company law disadvantages of incorporation. Len sealy and sarah worthington cases and materials in company law 8 th edition. In the doctrine of lifting the corporate veil, the law goes behind the mask or veil of incorporation in order to determine the real person behind the mask of a company. To lift or not to lift the corporate veil the unfinished story. If students of company law know just one case, that case will be salomon v. Lifting of corporate veil under the companies act ipleaders. In the uk, the concept of joint stock company, which is separate from its shareholders, was first introduced to the law by the act of 1844 maltby 1998.

Consequently, a company s liabilities are its own, not those of its shareholders. Doctrine of lifting of corporate veil perspective in taxation cases by nikhil singal and aditya bhattacharya the company is at law a different person altogether from the subscribers to the memorandum and, although it may be that after incorporation the business is precisely the same as it was before, and. To lift or not to lift the corporate veil the unfinished. Company law lifting of corporate veil with reference to leading case shagun singh.

In this article, we shall study the disadvantages of incorporation of a company. By using real life examples, discuss and explain why the concept of lifting the veil of incorporation. Reasons for lifting the veil of incorporation company. Under this section a public limited company newly incorporated as such. Michael2 abstract from the age long decision of house of lords in the case in salomon v. A critical appraisal of the doctrine of corporate personality under the nigerian company law akinola bukola, lecturer nigerian law school, augustine nnamani campus, enugu introduction the purpose of this work is to examine the practical, statutory and judicial application of the unique doctrine of corporate personality under the nigerian. This ground for piercing the veil of incorporation. Some texts attempt to explain veil lifting by categories. Pdf approach of the uk court in piercing corporate veil.

Definition of a company a company is a corporation an artificial person created by law. The chapter presents statutory examples of veil lifting, many of which involve corporate group structures and others involve straightforward shareholder limitation of liability issues. To offer a full account of the exceptions to the corporate personality doctrine, this paper also examines cases where the veil of incorporation is lifted due to a breach of a statutory provision. Lifting the veil of incorporation or piercing the corporate veil means the judicial act of. This separation is referred to as the veil of incorporation. Piercing the veil is corporate laws most widely used doctrine to decide when a shareholder or shareholders will be held liable for obligations of the corporation. Where the company is a sham the courts also lift the veil where a company is a mere cloak or sham hoax. Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders.

Piercing the corporate veil and fraud this article summarises the principles by which a court may pierce the corporate veil in cases of fraud in light of recent case law. The veil of incorporation limits the personal liability of corporate directors, officers and employees for actions taken by the business. Lifting the corporate veil the corporate veil metaphorically symbolises the distinction between the company as a separate legal entity and the shareholders who own the shares in the company. Therefore the courts usually do not look behind the veil to inquire why the company was formed or who really controls it. Incorporation has many advantages but to understand the working of a company the disadvantages of incorporation are required to be studied. Critically evaluate, with reference to relevant case law and statute, how far this statement accurately reflects the current law relating to lifting the veil of incorporation. Learn vocabulary, terms, and more with flashcards, games, and other study tools.

In that case the apex court simply laid down that a company is a distinct legal. Significance of corporate personality and the meaning of lifting the veil of incorporation louise franklin essay law miscellaneous publish your bachelors or masters thesis, dissertation, term paper or essay. The term company includes the corporate body or corporation but does. Separate legal entity means that is a different legal existence to individual members or stockholder who as natural person of company. One of the main motivations for forming a corporation or company is. In cases where the veil is lifted, the law either goes behind the corporate personality to the individual members or ignores the separate. Company law lifting the veil of incorporation part i. In turn, a protective veil of sorts is cast over the true controllers of the company. The paper examines case law and statutory provisions related to lifting the corporate veil. Approach of the uk court in piercing corporate veil. Lifting the corporate veil legal definition of lifting the. Jul 05, 2019 in 1862 this law was established and has rarely been lifted in uk company law.

The concept of lifting the corporate veil has been regarded by the courts and jurists. Company law lifting the veil of incorporation part i duration. Usually a corporation is treated as a separate legal person, which is solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed. Lifting the corporate veil academike for law students. Company law lifting the veil of incorporation youtube. In this case, the veil of incorporation is said to be lifted. However, business owners can still be liable for business activities if they failed to follow corporate guidelines, commingled assets or. In the american tradition, it is referred to as lifting the veil of incorporation or the disregard by the courts of the company s corporate personal or separate existence from its shareholders. Once a company is incorporated and a certificate of incorporation is issued, with reference to case law explain the meaning and effects of separate legal personality. It constitutes the bedrock principle upon which company is regarded as an entity distinct from. Lifting the corporate veil provisions under the companies. Lifting the corporate veil the courts have been extremely protective of the salomon principle, and it is only in extreme circumstances that they will consider. Incorporation by registration was introduced in 1844 and the doctrine of limited liability followed in 1855.

Legal entity is separate, independent from its founders the ability to own property, enter into commitments and act as a plaintiff, defendant in court. The principle of veil of incorporation is a legal concept that separates the personality of a corporation from the personalities of its shareholders and protects them from being personally liable for the companys debts and other obligations. Lifting of corporate veil academike for law students. Where a court determines that a company s business was not conducted in. Tax act, 1961, a company is said to be resident in india in any previous year if. Disadvantages of incorporation of company with explanations. To what extent does, and to what extent should, malaysian company law allow the lifting of the corporate veil between a parent company and its subsidiaries. Lifting the veil of incorporation under common law and.