This undermines the notion that salomon occupies the centre stage in corporate. Pdf on feb 1, 2014, hans tjio and others published lifting the veil. Corporate veil zimbabwe legal information institute. Many cases will fall into both categories, but in some circumstances the difference between them may be critical. On october 28, 2011, the maryland court of special appeals revisited the principles associated with piercing the corporate veil in ramlall v. As a general rule a corporation is a legal entity distinct from its shareholders. Wachenje, counsel for the respondent opposed the motion because it seeks to lift the corporate veil of the judgement debtor. First is the degree of control and second is the knowledge of the victims. In such cases the courts will lift the corporate veil and investigate the activities of the company. Dec 2012 when a company registered under the act, all the dealings with the company will be in the name of company, and the members will be disregarded. The subject of lifting the veil is well kflowfl in the literature on company law. He explains that in some cases, there is a need to remove all protection, i. The company, in the contemplation of law, is a person distinct from the shareholders.
To lift or not to lift the corporate veil the unfinished. The court will disregard the corporate veil to see the real persons behind it. To lift or not to lift the corporate veil the unfinished story. In creaesy, the court pierced the corporate veil, but in ord the claim to pierce was rejected. Lifting of corporate veil black laws dictionary defines piercing of corporate veil as follows. I then discuss the courts power to order pooling in the case of corporate groups. The fundamental attribute of corporate personality, from which all other consequences flow if that the corporation is a legal entity distinct from its members. Using the url or doi link below will ensure access to this page indefinitely. He further submitted that for the corporate veil to be lifted several things should be proved. The veil shall be lifted to prevent the avoidance of recognition by the eyes of equity. From peeping behind the corporate veil, to ignoring it completely. Concept in the eyes of law, a company is a legal person with a separate entity distinct from its members of shareholders. Uoi 25, the company was alleged of violation of section 11 of central excise and salt act.
The instrumentality and alter ego doctrines used by courts are practically indistinguishable. In the case of nepal, the statutory provisions that guide it are found under nepalese company act 2063. Farrar, john piercing the corporate veil in favour of creditors and. In what circumstances will the cayman courts lift the. Since then it is being followed till the present date. It constitutes the bedrock principle upon which company is regarded as an entity distinct from. Lifting or piercing of corporate veil circumstances in. Any references to a companys officers include its directors, as defined in the 2008 companies act. Control it is suggested that using a corporate stricture capriciously, namely to evade tortious liability, together with. In cases 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. As with all cases an early assessment needs to be made as to whether the charges will result in. It contains a comprehensive survey of the corporate veil cases in hong kong. When a court of law holds an shareholder personally liable for the debts of the corporation, this is called piercing the corporate veil.
Numerous cases have set out various legal tests for the very limited circumstances in which this. From peeping behind the corporate veil, to ignoring it. Unfortunately, piercing the corporate veil can be done, meaning that there are circumstances by which an lles corporate veil will not protect a business owner from a creditors claims. 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.
Thompson found 637 cases involving corporate groups and piercing the corporate veil. The courts may pierce the corporate veil to look at the characteristics of the shareholders. 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. An elaboration of corporate law in terms of a veil. 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 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. Piercing the corporate veil, financial responsibility, and. Corporation, veil of incorporation, lifting the veil, separate legal. In the doctrine of lifting the corporate veil, the law. Pdf lifting the veil on piercing the veil researchgate. Generally, the law will not go behind this veil of incorporation to look at the membership of the company. Discussing the appropriateness and or lack thereof, of veil piercing in modern corporate governance. Lifting of corporate veil with reference to leading cases.
In diversity cases, federal courts generally apply the laws of the relevant. Given the importance of the corporate entity as a veil that limits shareholder liability, it is important to note that in certain circumstances, the courts may reach beyond the wall of protection that divides a corporation from the people or entities that exist behind it. It constitutes the bedrock principle upon which company is regarded as. A similar search of lexis injuly, 1990 also turned up about 2000 cases. The nca has several provisions that enables corporate. According to the definition of black law dictionary, piercing the corporate veil is the judicial act of imposing liability on otherwise immune corporate officers, directors and.
Meaning of lifting of the corporate veil doctrine of lifting the veil. In hare v commissioner of customs and excise,17 it was held that the lifting of corporate veil is. The grounds to lift the corporate veil the necessity to lift the corporate veil may occur in situations related to i deficiency of shareholders equity. Various grounds for piercing of the corporate veil and elements of lifting of corporate veil analyzed through the lens of leading case laws and judgements form the crux of this project report. By comparison, corporate takeover and hostile takeover among the hottest corporate law. Thus, there are two main grounds which justify the lifting of corporate veil in tort cases.
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. 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. He submitted that the respondent and her directorsshareholders are distinct and separate legal persons. Therefore, the salomon principle remains an important part of corporate law today. Lifting the corporate veil legal definition of lifting the. 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. Recent decisions avail to clarify piercing the corporate. Company law lifting of corporate veil with reference to leading case shagun singh 15. There exists a wide body of cases and literature which focus.
The subject of lifting the veil is well known in the literature on company law. This doctrine has been established for business efficacy, necessity and convenience. There are essentially two ways that a creditor can get. What differentiated the two cases was that in creasey the. Lifting of corporate veil in tort cases in pursuit of. 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. Piercing the corporate veil under the new companies act. Piercing the corporate veil in american and german law liability.
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. Seperate legal entity lee vs lees air farming company limited explained by advocate sanyog vyas duration. However, there are several exceptions to this principle. In cases where the agency agreement holds good and the parties concerned have expressly agreed to such an agreement them the corporate veil shall be lifted and the principal shall be liable for the acts of the agent. The corporate veil may be lifted where the statute itself contemplates lifting the veil or fraud or improper conduct is intended to be prevented. Company as separate legal entity the company as a separate entity was firmly established in the landmark decision in salomon v. The lifting of corporate veil doctrine in hong kong. 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. From the age long decision of house of lords in the case in salomon v. Veil piercing is the most heavily litigated issue in corporate law, yet legal doctrine in. This can be done by good clear planning, before the charges are brought.
Federal law in this area is usually similar to state law. Common law countries usually uphold this principle of. A critical analysis of common law principles in lifting the corporate veil. It continues to be one of the most litigated and most discussed doctrines in all of corporate law. Term paper on lifting of corporate veil under judicial. In these cases courts lift the corporate veil to make members liable for the actions of the company. Lifting of corporate veil under the companies act ipleaders.
Corporate shareholders are not mere passive investors, but combine ownership of an entity with. By vasundhara majithia, yamini rajora, national law university jodhpur. The survey results are then compared with comparable surveys of the us cases to. Courts may pierce the corporate veil in taxation or bankruptcy cases, in addition to cases involving plaintiffs with contract or tort claims. The courts justification for lifting or piercing the corporate veil in cases involving category i situations is to be found in the policy of the statute or the intention of the parties to the contract e. Empirical, comparative and development perspective thomas k. The united states legal doctrine of corporate veil refers to the common. The veil of corporate personality may be lifted as per the provision of the company law of the country. This paper provides an empirical, comparative, and development perspective on the corporate veil doctrine. See merger or agencv of a subsidiarv cornration as grounds of the. 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 common law purpose and scope of piercing the corporate veil generally, a company has a separate legal juristic personality from its members the shareholders and its officers. This flexibility extends, in the last resort, to the view which the.
This may be illustrated by reference to those cases in which the court has been thought, rightly or wrongly, to have pierced the corporate veil. From 1897to 1966, was called the period of early 24. Lifting the veil of incorporation flashcards quizlet. In adeyemi v lan and baker nig ltd, the court held that there is nothing sacrosanct about the veil of incorporation. Approach of the uk court in piercing corporate veil by.
A checklist for maintaining your corporate veil legalzoom. Where a court determines that a companys business was not conducted in. Lifting the veil occurs where the courts or law disregard the corporate personality of the company in deserving circumstances. Veil piercing in corporate governance, dissertation. It has also been generally accepted that the piercing of the corporate veil is an exceptional procedure. In both cases, the plaintiff argued that the court should piece the corporate veil so that judgment could be levied against the entity to which the assets had been transferred. The issue came up for discussion in the case of adams v. Lifting of corporate veilcase study john vs lipman. To lift the corporate veil or look behind it, on the other hand, should mean to have regard to the shareholding in a company for some legal purpose. Michael2 abstract from the age long decision of house of lords in the case in salomon v. This is known as piercing or lifting the corporate veil.
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