If theres not a clear distinction between what youre doing as an individual versus what the corporation is doing, a court of law may pierce the corporate veil in other words, hold you liable for actions taken by the business. It is a simple matter of if the company is ordered to be wind up by a court and if the receiver orders the shareholders to pay up the capital shortfall, then the shareholders pay up lah. However, even though t he legislature and the courts have in many cases now allowed the corporate veil to be lifted, it should be noted that the principle of veil of incorporation is still the rule and the. Ownership and control are not sufficient criteria to remove the corporate veil. Mar 08, 2016 lifting the veil of incorporation in confiscation cases.
Introduction the lifting of corporate veil doctrine remains one of the most difficult areas of hong kong company law. For example, in confiscation proceedings under the proceeds of crime act 2002 monies received by a company can, depending upon the particular facts of the case as found by the court, be regarded as having been obtained by. The supreme court stated that this was a fit case for lifting of the corporate veil and the veil must be lifted when the device of incorporation is being used for some illegal or improper purpose. Lifting up of corporate veil with important cases company. One of the main motivations for forming a corporation or company is the limited liability it offers its shareholders. Besides the statutory provisions for lifting the corporate veil, courts also do lift the corporate veil to see the real state of affairs. The aim of the paper is to explore recent case law in order. 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. Salomon v salomon involved the principle of separate corporate personality. A good lifting the veil meaning is a company that loses its liability protections, and this could apply to corporations or llcs. A flood of case law permeates this area of company law. Nutritek heard argument that there is in fact no principle of law which allows a court to disregard the separate legal personality of a company. Lifting of corporate veil black laws dictionary defines piercing of corporate veil as follows.
The most fundamental principle of company law is corporate personality. Article there are some disadvantages of incorporation which are important to be pointed out like as lifting the corporate veil, formality and expenses,company is not a citizen. A company being an artificial creation of the law is in reality run by and under the control of some individuals. Reasons for lifting the veil of incorporation company law. Union of india xiv, it was alleged that the company had violated section 11a of the central excises and salt act, 1944. Aug 31, 2015 in your case, it has nothing to do with the lifting of veil of incorporation. This doctrine emphasizes that a company has a separate entity from its.
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. To offer a full account of the exceptions to the corporate personality doctrine, this. Company law lifting the veil of incorporation part i youtube. Apr 25, 2019 the doctrine of lifting the corporate veil and the judicial trend in determining the criminal liability of corporations. What is lifting of corporate veil in company law malescu. The courts in general consider themselves bound by the veil of incorporation principle. Michael2 abstract from the age long decision of house of lords in the case in salomon v. Lifting the veil of incorporation is rare in the uk. 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. 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. Lifting the veil occurs where the courts or law disregard the corporate personality of the company in deserving circumstances. The incorporation of a company creates a separate person in law. Lifting the veil can be used to impose liability upon the shareholders or for other. Lifting the corporate veil academike lawctopus for law.
Incorporation by registration was introduced in 1844 and the doctrine of limited liability followed in 1855. The aim of the paper is to explore recent case law. Academics such as farrar argue that lifting the veil of incorporation has not been done in any sort of systematic way. Lifting the veil of incorporation chancery law chronicles. In adeyemi v lan and baker nig ltd, the court held that there is nothing sacrosanct about the veil of incorporation. Len sealy and sarah worthington cases and materials in company law 8 th edition. The court thus found the individual members behind the corporate body liable for the acts that they attempts to carry on through the guise of the. Lifting of corporate veil academike for law students. However, there are still circumstances in which the courts will allow a request to lift the veil. The court of appeal rejected an unprincipled and broad brush approach and listed some nonexhaustive. The corporate veil in the united kingdom is a metaphorical reference used in uk company law for the concept that the rights and duties of a corporation are, as a general principle, the responsibility of that company alone. In case of economic offences a court is entitled to lift the veil of corporate entity and pay regard to the economic realities behind the legal facade. Cases and articles have been used to set out the main principles in which the law is based. Aug 27, 2019 even if the courts have the possibility of lifting the corporate veil in company law, they are usually reluctant to remove such protections and will only lift them in a case where the statute was violated in some manner or there is fraudulent activity.
Purpose the paper examines case law and statutory provisions related to lifting the corporate veil. Judge james manby formulated the following items of the case law applicable to this case bainbridge 2010. The privilege as conferred by salomon is one that enables company to enjoy limited liability whereas at the other end of the spectrum, the law might tackle the limited liability principle and make the people behind the company running. Lifting the veil of incorporation is a legal decision that treats the rights and duties of a corporation as the rights or liabilities of its owner. In your case, it has nothing to do with the lifting of veil of incorporation.
Lifting the veil can be used to impose liability upon the shareholders or for other purposes, such as ascertaining appropriate jurisdiction. Consequently, a companys liabilities are its own, not those of its shareholders. The issue came up for discussion in the case of adams v. Lifting or piercing the corporate veil company law. The law recognizes that a company is a separate legal entity distinct from its shareholders. The law recognizes that a company is a separate legal entity distinct from its. Even if the courts have the possibility of lifting the corporate veil in company law, they are usually reluctant to remove such protections and will only lift them in a case where the statute was violated in some manner or there is fraudulent activity. Company law lifting the veil of incorporation part i. Abuse of the separate legal personality separate legal personality. Introduction salomon v salomon 1 involved the principle of separate corporate personality. The corporate veil separates the company from its shareholders. The company was a sham set up for the purpose of evading specific performance of the original contract for sale and therefore the court lifted the veil and ordered to transfer the land to the affected party. Indian legal system civil laws company law lifting of corporate veil. There are situations where the court will lift the veil of incorporation in order to.
Lifting the veil of incorporation under common law and statute. This article at first introduces to the readers the concept of veil of incorporation, then it explains the meaning of the termlifting of the corporate veil, it then points out the judicial as well as the statutory provisions for lifting of the corporate veil with the help of various case laws. Jun 12, 20 company law lifting of corporate veil with reference to leading case shagun singh 15. Lifting of corporate veil with reference to leading cases. An llc or corporation entails a legal entity thats separate from its owners. Company law lifting of corporate veil with reference to leading case shagun singh 15. It cannot act on its own, it can act only through natural persons i. For example, in the case of petrodel resources ltd and others v prest. This case describes in detail the grounds for applying the doctrine of lifting the veil of incorporation. Therefore the courts usually do not look behind the veil to inquire why the company was formed or who really controls it. In that case the apex court simply laid down that a company is a distinct legal.
Lifting of corporate veil under the companies act ipleaders. 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. To offer a full account of the exceptions to the corporate personality doctrine, this paper also. 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. Jan 07, 2015 besides the statutory provisions for lifting the corporate veil, courts also do lift the corporate veil to see the real state of affairs. The case of boyle transport northern ireland limited v r 2016 ewca crim 19 sets out some guidance when determining whether to pierce the corporate veil under the proceeds of crime act 2002 poca.
Lifting or piercing of corporate veil incorporation of company ca intermediate corporate laws duration. Understanding the veil of incorporation psf accounting. Over enthusiastic reading of the law can cause wrong analysis of the situation. Lifting the veil of incorporation under common law and. This article at first introduces to the readers the concept of veil of incorporation, then it explains the meaning of the term lifting of the corporate veil, it then points out the judicial as well as the statutory provisions for lifting of the corporate veil with the help of various case laws. This will mostly be when people have tried to use the incorporation to evade a legal obligation or liability. However, even though the legislature and the courts have in many cases now allowed the corporate veil to be lifted, it should be noted that the principle of veil of incorporation, that is separate legal existence of a company, is still the rule and the instances of lifting or piercing the veil are the exceptions to this rule. In considering whether the corporate form has been used in such a way as to justify the lifting of the corporate veil, the court stated that the correct test in relation to groups of companies was whether the company had been used as a mere facade concealing the true. Shanthi augustin in a more simple explanation, lifting the veil of incorporation means that the company is treated as identified with its members or.
Ones theory associated with corporate entity will be indeed your current basic concept on how the complete law of corporation is usually based. 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. This is commonly referred to as lifting the corporate veil. The company is treated as in some degree identified with its members or directors or. The lifting of corporate veil doctrine in hong kong. Aug, 2019 the essay analyses and scrutinises under which circumstances the corporate veil can be disregarded in the uk. In the case of tax evasion or unauthorised tax avoidance, the courts may look past the salomon principle, pierce the corporate veil and declare the company a sham.
The essay analyses and scrutinises under which circumstances the corporate veil can be disregarded in the uk. This separation of the corporation and its members, is commonly. Lifting the corporate veil 1 english company law youtube. The concept of the corporate veil is that, from a legal and accounting perspective, a corporation is actually a separate entity. Lifting of corporate veil academike for law students in. The restrictions on lifting the veil, found in contractual cases made no. 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 english criminal law there have been cases in which the courts have been prepared to pierce the veil of incorporation. Salomon is the judicial authority that enforces the legal personality of corporate entity especially when it has been incorporated. Introduction when carrying on business, seeking an appropriate corporate structure which accommodates to the needs of the intended business and lifting the. The most fundamental advantage of incorporation is that it creates a separate legal entity. The cases in which the corporate veil has been lifted fall into four. The circumstances which give rise to courts lifting the corporate veil continues to be one of the most hotly debated and most discussed topics in corporate law.
Just as a natural person cannot be held legally accountable for the conduct or obligations of another person, unless they have expressly or implicitly. Lifting the veil of incorporation under common law and statute lifting the veil of incorporation under common law and statute chrispas nyombi 20140204 00. Oct 22, 2019 lifting or piercing of corporate veil incorporation of company ca intermediate corporate laws duration. The bottom line being only the court will lift the veil in the face of grave abuse of the corporate form and not otherwise. It constitutes the bedrock principle upon which company is regarded as an entity distinct from. The courts will only lift or pierce the veil where an inequitable situation may be occurring behind the corporate facade based on the facts of each case. This means that owners cannot be held liable for any business debts that a company incurs. But incorporation also has its disadvantages, the prominent one being instances of lifting of corporate veil. Jun 19, 2018 lifting or piercing of corporate veil incorporation of company ca intermediate corporate laws duration. 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. It is one of the most widely used doctrines to decide when a shareholder or shareholders will be held liable for obligations of the corporation and continues to be the. The first point to be dealt with in prest was whether english law recognises the concept of piercing the corporate veil at all.
Company law lifting the veil of incorporation part i duration. The veil shall be lifted to prevent the avoidance of recognition by the eyes of equity. The aim of the paper is to explore recent case law in order to determine whether courts have. 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. Lifting of corporate veil under company law an analysis. Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or. Revised 16 march 20 the aim of the paper is to explore recent case law in. Reasons for lifting the veil of incorporation studocu.
Lifting the veil of incorporation wmh law corporation. The concept lifting the veil of incorporation essay. The judgment of the court of appeal in the adams case can be said to be the current law, which is nothing more than a reiteration of the law laid down by the house of lords in solomons case. Lifting of corporate veil of company under company law. The lifting or piercing of the corporate veil is more or less a judicial act. There is a dearth of overarching guiding principles for a body of largely incoherent case law. The paper examines case law and statutory provisions related to lifting the corporate veil. Lifting the veil of incorporation in confiscation cases. Pdf approach of the uk court in piercing corporate veil. A company is an artificial person is clothed with a corporate veil. In turn, a protective veil of sorts is cast over the true controllers of the company. Abstract from the juristic point of view, a company is a legal person distinct. Doctrine of lifting the veil of incorporation adeleye, peace.
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