What is the meaning of lifting the veil of incorporation?
LIFTING THE VEIL OF INCORPORATION. Lifting the veil occurs where the courts or law disregard the corporate personality of the company in deserving circumstances.
What is corporate veil theory?
The Corporate Veil Theory is a legal concept which separates the identity of the company from its members. Therefore, if the company incurs debts or contravenes any laws, then the members are not liable for those errors and enjoy corporate insulation.
What is lifting the veil of incorporation and circumstances under which it can be realized?
In other words, the Courts, in compelling situations, ignored all the conceptions of the corporate personality and hold the directors and shareholders personally liable. This is known as lifting or piercing the corporate veil.
Under what circumstances will the Court lift the veil of incorporation?
FRAUD OR IMPROPER CONDUCT– the most common ground when the courts lift the corporate veil is when the members of the company are indulged in fraudulent acts. The intention behind it is to find the real interests of the members. In such cases, the members cannot use Salomon principle to escape from the liability.
Is the Salomon principle still relevant today?
remains unaltered today; a limited liability company is a legal person, separate and distinct from the members or directors and it. Furthermore, the principle enunciated in Salomon v, Salomon is NOT outdated, and still has relevance in modern company law.
Who can pierce the corporate veil?
“Piercing the corporate veil” refers to a situation in which courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts. Veil piercing is most common in close corporations.
What is corporate veil under Companies Act 2013?
A corporate veil is a legal concept that separates the acts done by the companies and organizations from the actions of the shareholders. This is not an absolute right the court depending on the facts of the case can take the decision whether the shareholder is liable or not.
What are the two circumstances of lifting up a corporate veil?
i) It the court in interpreting a statute or document and the statute itself is ambiguous, which would allow the court to treat a group as a single entity. ii) If special circumstance indicate that it is a mere facade concealing the true facts, the court may lift the veil.
When can the corporate veil be pierced?
Interestingly though, the judge reached these decisions not on the basis of piercing the corporate veil (he accepted the argument that this was something he could not do absent clear impropriety), but concluding that he had a wider discretion under section 24 of the Matrimonial Causes Act 1973.
When can the veil of incorporation be lifted?
In Life Insurance Corporation of India v Escorts Ltd [1986], the Honourable Supreme Court asserted that the veil may be lifted in cases where the aim is to avoid a taxation statute or to evade obligations imposed by the law or for the protection of public interest.
Was the veil lifted in Salomon?
And as for group of companies, with the Salomon ‘separate legal entity’ principle, all of the companies of a group are independent and would not be liable just because one of the group of companies went into insolvent liquidation. Here, the court lifted the veil as the company was a “mere façade concealing true facts”.
Why is Salomon v Salomon important?
The landmark case of Salomon v A. Salomon and Company [1897] A.C. 22 saw the House of Lords firmly uphold the principle of separate corporate personality which has been the starting point for any discussion on the topic ever since. Mr Salomon controlled a boot-making business as a sole trader.