Corporate veil zimbabwe legal information institute. Lifting of corporate veil academike lawctopus for law. Being an artificial person, it company cannot act on its own, it can act only by natural persons. But the courts will lift the corporate veil in some exceptional cases. 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. However, there has not been a comprehensive empirical study of the australian cases relating to piercing the corporate veil. Another meaning of corporate veil is lift is a legal term where the court allows a lawsuit or prosecution to proceed against the individual. Corporate personality and the veil of incorporation 2. The most common way of lifting the corporate veil in company law one can come across involves close corporations. Purpose the paper examines case law and statutory provisions related to lifting the corporate veil. In times of war the court is prepared to lift the corporate veil and determine the nature of shareholding as it did in the daimler case where germen shareholders held the shares of an english company during the time of world war 1. Company law lifting the veil of incorporation part i. A company being an artificial person, does not have a mind of its own and thus cannot act on its own, it can only act through natural persons or.
This document is highly rated by b com students and has been viewed 4710 times. Corporate personality and piercing or lifting the veil of incorporation tends to be a popular topic for exam questions, and can also connect with most other topics in company law. Part iii analyses the common law grounds of lifting the veil that have been frequently proposed, to determine the underlying reasons for. Dec 14, 2010 part i of this paper will briefly survey the concept of company as a separate entity. In doing the same, the courts have evolved the concept of lifting or piercing the corporate veil. Lifting of corporate veil black law s dictionary defines piercing of corporate veil as follows. In company law, the doctrine of lifting the corporate veil has been well known for some time. The incorporation of a company creates a separate person in law. Common law countries usually uphold this principle of. As per the companies act 20 company means any a company formed and registered under the companies act 20.
Cases and articles have been used to set out the main principles in which the law is based. 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 lifting the veil. The concept of lifting of corporate veil scrutinizes, the human agency behind the scenes of the company, to determine the real culprit committing such offences. Abuse of the separate legal personality separate legal personality. The court will disregard the corporate veil to see the real persons behind it. This document, prepared by the american bar association section of business law, committee on corporate laws. Term paper on lifting of corporate veil under judicial. The courts according to gowers common dictum would lift the veil when the corporate personality of the company is being blatantly being used as a means to commit fraud, improper conduct or where the protection. The doctrine of lifting the veil can be understood as the identification of the company with its members. 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. 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. Lifting corporate veil company law 1 linkedin slideshare. Company law k1208885 what is meant by the corporate veil.
Lifting the corporate veil the courts have been extremely protective of the salomon principle, and it. Jan 07, 2015 the corporate veil may be lifted where the statute itself contemplates lifting the veil or fraud or improper conduct is intended to be prevented. In turn, a protective veil of sorts is cast over the true controllers of the company. A company is a juristic person, but in reality it is a group of person who are the beneficial owners of the property of the corporate body. Part iii analyses the common law grounds of lifting the veil that have been frequently proposed, to determine the underlying reasons for judicial disregard of the separate entity principle. Oct 02, 2016 overview principle of corporate personality statutory veil lifting judicial veil lifting impact of adams conclusion 3. By vasundhara majithia, yamini rajora, national law university jodhpur. The concept of lifting the corporate veil is a very dynamic concept. In such cases the courts will lift the corporate veil and investigate the activities of the company. It constitutes the bedrock principle upon which company is regarded as an entity distinct from. What is lifting of corporate veil in company law malescu. In the doctrine of lifting the corporate veil, the law. The two classic cases of the fraud exception are gilford motor company ltd v.
In this respects, the court will get through the corporate shell and apply the guideline of what is known as lifting or piercing the corporate veil. Disregarding the separate corporate personality is often referred to lifting or piercing the veil. Principle of lifting the corporate veil there is often talk about how a company is a person in eyes of law. Over the years, they have taken an inconsistent approach and so categorising the situations is difficult. Taxat times tax legislations warrant the lifting of the corporate veil. The subject of lifting the veil is well kflowfl in the literature on company law. The lifting of corporate veil doctrine in hong kong. Oct 16, 2017 the concept of lifting of corporate veil scrutinizes, the human agency behind the scenes of the company, to determine the real culprit committing such offences. When a company is incorporated it is treated as a separate legal entity distinct from its promoters, directors, members, and employees. In some cases the corporate veil has not been lifted prime examples of that. Lifting of corporate veil by advocate sanyog vyas duration. An analysis of lifting of the corporate veil in light of s209 of.
Lifting the corporate veil academike lawctopus for law. The companys act kenya 2015 seems to ignore the possibility of lifting the corporate veil to make members of a company liable for the companys wrongs. A company is treated as if its a human of its own kind. Principle of lifting the corporate veil legal service india. Lifting of the corporate veil means disregarding the corporate personality and looking behind the real person who are in the control of the company. Lifting the veil of incorporation wmh law corporation. 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.
In cases where the veil is lifted, the law either goes behind the corporate personality. The doctrine of lifting the corporate veil means ignoring the corporate nature of the body of individuals incorporated as a company. Lifting or piercing the corporate veil the company, in the contemplation of law, is a person distinct from the shareholders. Jun 25, 2019 company law lifting the veil of incorporation part i. Feb 10, 2018 may 02, 2020 concept of lifting of corporate veil introduction, company law b com notes edurev is made by best teachers of b com. Definition of lifting the corporate veil in the legal dictionary by free online english dictionary and encyclopedia. From peeping behind the corporate veil, to ignoring it. Where a court determines that a company s business was not conducted in. Aug, 2019 the essay analyses and scrutinises under which circumstances the corporate veil can be disregarded in the uk. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the. However, there are certain circumstances when the court of law removes the veil so that the members of the corporation are not protected anymore by the veil. Company law lifting of corporate veil with reference to leading case shagun singh 15.
The veil shall be lifted to prevent the avoidance of recognition by the eyes of equity. It constitutes the bedrock principle upon which company is regarded as. May 02, 2020 concept of lifting of corporate veil introduction, company law b com notes edurev is made by best teachers of b com. Jun 12, 20 company law lifting of corporate veil with reference to leading case shagun singh 15. 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. In adeyemi v lan and baker nig ltd, the court held that there is nothing sacrosanct about the veil of incorporation. Lifting or piercing of corporate veil circumstances in. Lifting of corporate veil with reference to leading cases. This doctrine has been established for business efficacy, necessity and convenience. The veil of corporate personality, even though not lifted sometimes, is becoming more and more a transparent form of ensuring smooth business practices in modern jurisprudence. In this article, we present the results of the first such study. Lifting of corporate veil of company under company law law times. And while by the fiction of law an organization is an unmistakable element, yet truly it is an association of people who are in reality the beneficial proprietors of all the corporate property. Introduction when carrying on business, seeking an appropriate corporate structure which accommodates to the needs of the intended business and lifting the corporate veil uk law.
Lifting of corporate veil law corner corporate law. 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. The concept of the corporate veil dates back to the landmark decision of the house of lords in salomon v a salomon and co ltd 1897 ac 22, where the legal separation between a company and its shareholders was established. While we deal with these provisions in detail in chapter 17, we brie. Introduction the lifting of corporate veil doctrine remains one of the most difficult areas of hong kong company law.
The company, in the contemplation of law, is a person distinct from the shareholders. The law goes be hind the veil or screen in between the company and its members in order to find out the person behind the mask for the sole reason that is to make the wrongdoer personally. Overview principle of corporate personality statutory veil lifting judicial veil lifting impact of adams conclusion 3. Lifting of corporate veil under the companies act ipleaders. The act of piercing the corporate veil until now remains one of the most. In a number of circumstances, the court will pierce the corporate veil or will ignore the corporate veil to reach the person behind the veil or reveal the true form and character of the concerned company. Circumstances in which courts may lift the corporate veil. Lifting the veil can be used to impose liability upon the shareholders or for other purposes, such as ascertaining appropriate jurisdiction. Broadly there are two types of provisions for the lifting of the corporate veil judicial. The defendants company and the defendants wife entered into a lease agreement solely for purposes of defeating the sale in execution that was imminent and so that they could remain in occupation of the property after the sale. It is given mandate to provide various kinds of information such as minutes of meetings, number of directors, list of objects for what the company is formed and others.
Prest decision in the light of the economic analysis of the company s limited liability. Part i of this paper will briefly survey the concept of company as a separate entity. The essay analyses and scrutinises under which circumstances the corporate veil can be disregarded in the uk. The court recognised the fundamental principle of the corporate veil by noting that, the approach of both the corporate and tax laws, particularly in the matter of corporate taxation, generally is founded on the abovementioned separate entity principle, i. 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. The most fundamental principle of a company law is its corporate personality. 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. Concept of lifting of corporate veil introduction, company. The concept of lifting the corporate veil has been regarded by the courts and jurists. Wherever the members of a company violates any statutory provisions or carry out any nondesirable activities under the guise of the corporate veil above the company, thereby misuse the privilege conferred to them, the courts are entitled to look beyond the veil, and this is known as lifting of corporate veil. Lifting the corporate veil in company law, the doctrine of. Lifting of corporate veil of company under company law. 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. Additionally, many of the situations where lifting the veil is at issue involve corporate insolvency, the insolvency act 1986 has some key veil lifting provisions.
The fundamental attribute of corporate personality, from which all other consequences flow if that the corporation is a legal entity distinct from its members. 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. Prest decision in the light of the economic analysis of the companys limited liability. One of the main motivations for forming a corporation or company is the limited liability it offers its shareholders. Lifting of corporate veil academike for law students. It is assumed that the owners of the company are protected from liabilities by the company under a veil of incorporation. Principle of corporate personality in the eyes of law, if a company is duly incorporated it has a separate legal entity. 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. Lifting the veil judicial exceptions statutory exceptions company. Courts have authority to ignore the corporate character and remove the veil against any person hiding behind the name of the company, for fraud committed.
Every corporation must follow the laws of the state of incorporation. Lifting the corporate veil provisions under the companies. Concept in the eyes of law, a company is a legal person with a separate entity distinct from its members of shareholders. In the case of nepal, the statutory provisions that guide it are found under nepalese company act 2063. There is a dearth of overarching guiding principles for a body of largely incoherent case law. C mitchell, lifting the corporate veil in the english courts. Instead, attention is given to making directors and other officers liable for corporate wrongs in specified circumstances. Lifting of corporate veil or disregarding of the corporate personality is c ommon buzz in the. 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. Lifting the corporate veil legal definition of lifting the. Refer to circumstances where the law or the court disregard the corporate entity by looking behind it to determine the reality of a situation. Pdf approach of the uk court in piercing corporate veil. 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.
Generally, the law will not go behind this veil of incorporation to look at the membership of the company. Usually, the owners of the company are free from any liability. Meaning of lifting the corporate veil as a legal term. Lifting the veil of incorporation under common law and. Consequently, a companys liabilities are its own, not those of its shareholders. Lifting the veil occurs where the courts or law disregard the corporate personality of the company in deserving circumstances. Wherever the members of a company breach any statutory provisions or carry out any illegal act under the guise of the corporate veil above the company, thereby misuse the privilege conferred on them, the courts are entitled to look beyond the veil or lift the veil, and this is known as lifting of corporate veil. The veil of corporate personality may be lifted as per the provision of the company law of the country. Section of the companies act 71 of 2008 sets out the process and procedure to be followed in order to incorporate a company.
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