October 16, 2016 october 16, 2016 sourav 0 comments company law, corporate law, corporate veil, lifting of corporate veil piercing the corporate veil is the most widely used doctrine in corporate law for deciding whether shareholders could be liable for all the commitments of the company. Lifting the corporate veil refers to the possibility of looking behind the company framework (or behind the company’s separate personality) to make the member liable, as an exception to the rule that they are normally shielded by the corporate shell that is they are not liable to outsiders at all, and are only normally liable to pay the. Corporations artificial entities that are created by state statute, and that are treated much like individuals under the law, having legally enforceable rights, the ability to ac. The central purpose of this paper is to investigate the bounds of the principle of limited liability part i of this paper will briefly survey the concept of company as a separate entity part ii deals with law of piercing the veil part iii analyses the common law grounds of lifting the veil that. Lifting of corporate veil: indian scenario 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.
Lifting the corporate veil the general rule is that a company is a legal person and is distinct from its members the principle is regarded as a curtain, a veil, or a shield between the company and its members, thus protecting the latter from the liability of the former. The court cannot lift the veil only because, in its opinion, it meets the interests of justice, but the corporate veil should be lifted if the case also involves impropriety, abuse of rights, deception or offense (anderson, 2012, p 133. Lifting corporate veil essay jean, lynette, lauren and ryan the director of w&h ltd, own one quarter of the company’s issued shares each - lifting corporate veil essay introduction the company operates its business by providing management services to commercial organizations.
The principle of lifting the corporate veil as an exception to the distinct corporate personality of a company or its members is well recognized not only to unravel tax evasion1 but also where protection of public interest is of paramount importance and the corporate entity is an attempt to evade legal obligations and lifting of veil is. Lifting or piercing the corporate veil is a legal process or proceedings taken to uncover the common shield in respect of any suspicious event happened or to be happened or on the basis of allegation made or to be made against the company. But for clarity as to ˜lifting of the corporate veil™, an understanding of the corporate personality of a company is required, along with study of the provisions of indian law that pave the way for courts to pierce the corporate veil. In considering whether to lift or pierce the corporate veil the high court stated that there is a difference between lifting the veil (which is to ascertain the true factual position without imposing personal liability on an individual) and piercing the veil (when a party seeks to impose personal liability on an individual connected to the. Lifting of corporate veil in tort cases in pursuit of justice essay sample limited liability has been the prevailing rule for corporations for more than a century.
Lifting the corporate veil is the removal of this shield it is the judicial process by which courts will determine the negative / evil character of a company, if any in the process the corporate identity of the company would be temporarily / permanently removed. Lifting the corporate veil 1 lifting of corporate veil and exceptions saumya singh 1321760 christ university 2 concept a company is a legal person with a separate entity this shows that there is a veil drawn between the company and its members lifting the corporate veil is an exception to the concept of separate legal entity. Corporate governance is the way a corporation polices itself in short, it is a method of governing the company like a sovereign state, instating its own customs, policies and laws to its employees from the highest to the lowest levels. Piercing the corporate veil is the legal jargon used to describe an action pursued against a company that ultimately leads to personal liability of the owners, shareholders, or members wherein the corporate structure is disregarded.
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. Piercing the corporate veil is the legal jargon used to describe an action pursued against a company that ultimately leads to personal liability of the owners, shareholders, or members wherein the. Lifting or piercing the corporate veil the company, in the contemplation of law, is a person distinct from the shareholders 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 court, however, can in exceptional circumstances disregard this principle, and “lift the corporate veil” to hold member(s) liable below, we explain the purpose of the corporate veil and in what situations the court will look behind the business’ separate legal personality. The central purpose of this paper is to investigate the bounds of the principle of limited liability part i deals with law of piercing the veil part ii analyses the common law grounds of lifting the veil that have been frequently proposed, to determine the underlying reasons for judicial disregard.
It seems that the protection afforded by limited liability has received a body blow in yesterday’s budget with an announcement that directors may face personal liability for their company’s tax liabilities. Third, the karnataka high court appears to have readily permitted lifting the corporate veil without at all alluding to the jurisprudence on the subject-matter generally, courts defer to the sanctity of the corporate form as a separate legal personality and are slow to lift the corporate veil, as evidenced by adams v. Lifting the corporate veil definition: disregarding the general rule a corporation is a legal entity distinct from its shareholders by regarding the company as a mere agent or puppet of a controlling shareholder or parent corporation.
Corporate veil the corporate veil is the liability shield that inherently attaches to the shareholders of a corporation in general, shareholders of a corporation are not personally liable for corporate debts or for torts committed by the corporation. 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 usually a corporation is treated as a separate legal person,.