Lifting the corporate veil is an exception to the concept of separate legal entity. Pdf upon acquisition of legal personality a company enjoys certain attributes such as. Lifting the veil of incorporation flashcards quizlet. This is known as lifting or piercing the corporate veil. 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. Page 5 of 11 shareholders, investors, parties to the contract and also for tax evasion, the court can always lift the corporate veil and examine the substance of the transaction. From the age long decision of house of lords in the case in salomon v. Whether on a summary assessment it will be possible to tell whether the documents. For lord sumption in prest, there is a distinction between piercing and lifting the veil. A degree of clarity has been provided to this area by two recent decisions. A critical appraisal of the doctrine of corporate personality under the nigerian company law akinola bukola, lecturer nigerian law school, augustine nnamani campus, enugu introduction the purpose of this work is to examine the practical, statutory and judicial application of the unique doctrine of corporate personality under the nigerian.
Principle of lifting the corporate veil there is often talk about how a company is a person in eyes of law. Analysis of the development is done by looking at the veil piercing doctrines under u. Lifting or piercing of corporate veil circumstances in. If a director continues to trade after this point he will risk having to contribute to the debts of the company.
Principle of lifting the corporate veil legal service india. The paper does not cover the statutory provisions for lifting of corporate veil. Piercing the corporate veil mojahed al sebae talks about the extent to which the uae law recognises a llcs separate legal personality and the specific cases under which the corporate veil can be lifted. The paper only deals about lifting of corporate veil in general and the instances in which court can life it. The case provides a good reminder to business owners that they must truly follow statutory requirements for maintaining a true business or they will not receive the. The strictness of this approach led to a principle of piercing the corporate veil. Piercing the corporate veil and fraud this article summarises the principles by which a court may pierce the corporate veil in cases of fraud in light of recent case law. Prest decision in the light of the economic analysis of the companys limited liability article pdf available in ssrn electronic journal january 2017. Lifting or 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. 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.
The doctrine of lifting the corporate veil means ignoring the corporate nature of the body of individuals incorporated as a company. It is this statement of principle that underpinned all of the early attempts to pierce the corporate veil. Second, it is not clear from the judgment itself whether the tax authorities advanced the argument regarding lifting the corporate veil. Lifting the corporate veil, in simple words means disregarding the corporate personality and. A company is an artificial person having separate legal entity, distinct from its members. The doctrine of piercing or lifting of the veil of a corporate personality makes a change in the attitude of law as originally adopted towards the concept of separate legal personality or entity of the corporation. Lifting of corporate veil with reference to leading cases corporate law reporte. Lifting of corporate veil with reference to leading cases. Pdf piercing the corporate veil doctrine in poland. In hare v commissioner of customs and excise,17 it was held that the lifting of corporate veil is.
Company law lifting of corporate veil 5 piercing of corporate veil piercing the veil is corporate laws most widely used doctrine to decide when a shareholder or shareholders will be held liable for obligations of the corporation. Doctrine of lifting of corporate veil perspective in taxation cases by nikhil singal and aditya bhattacharya the company is at law a different person altogether from the subscribers to the memorandum and, although it may be that after incorporation the business is precisely the same as it was before, and. Approach of the uk court in piercing corporate veil. However the cayman courts have consistently followed the english case rulings on the doctrine. Meaning of lifting of the corporate veil doctrine of lifting the veil. Circumstances in which the court can lift the corporate veil. In my view, the principle that the court may be justified in piercing the corporate veil if a companys separate legal personality is being abused for the purpose of some relevant wrongdoing is well established in the authorities. This shows that there is a veil drawn between the company and its members. Definition and analysis of piercing the corporate veil.
The subject of lifting the veil is well kflowfl in the literature on company law. Pdf approach of the uk court in piercing corporate veil. The lifting of corporate veil doctrine in hong kong. Corporate personality and the veil of incorporation 2. Limitation the paper only deals about lifting of corporate veil in general and the instances in which court can life it. However, this civil file is chosen for the purpose of the. This paper is written as a comparative study of the development of the corporate veil piercing doctrine throughout the years. 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. A company is treated as if its a human of its own kind. 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.
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 those circumstances, the corporate veil cannot give any protection to the directors. The central purpose of this paper is to investigate the bounds of the principle of limited liability. In what circumstances will the cayman courts lift the corporate veil. 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.
Lifting the corporate veil limited liability pages. Michael2 abstract from the age long decision of house of lords in the case in salomon v. According to palmer, there are seven instances where the corporate veil or the legal personality can be lifted or pierced by the court. Lifting the veil can be used to impose liability upon the shareholders or for other purposes, such as ascertaining appropriate jurisdiction. Part i of this paper will briefly survey the concept of company as a separate entity. Approach of the uk court in piercing corporate veil by. In what circumstances will the cayman courts lift the. The phrase piercing the corporate veil was described in a 1973 case as now fashionable. Timely file the annual report with the secretary of state.
Concept a company is a legal person with a separate entity. Term paper on lifting of corporate veil under judicial. Piercing the corporate veil is the most litigated issue in corpo rate law and. Salomon v salomon involved the principle of separate corporate personality. Empirical study of 30 years of piercing the corporate veil in the age of the llc, 50 wake forest l. After the high profile cases in 1990s which were decided against the doctrine of corporate veil lifting, it can be said that the veil lifting has become rare under the english law. Moreover, we find that, although courts do invoke the mantra of undercapitalization to justify a determination to pierce the corporate veil, we find that, in each case, there are other justifications for veil piercing that are consistent with our taxonomy. 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. Fraudulent actions would not be protected, nor would those where the limited company was simply being used as a facade or a sham. Some researchers argue that the courts have become increasingly willing to lift the veil. Rationale the paper aims to study and analyze the concept of lifting the corporate veil and the instances in which court can lift it. Corporate veil pierced where owner was sloppy with.
For example, in vodafone the bombay high court did not consider lifting the corporate veil to impose taxation in case of indirect transfers. 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. Lord palmer simply enumerates special cases in which the veil has been. T he limited liability company in the uae the company is one of the most commonly used and preferred legal form of companies. From peeping behind the corporate veil, to ignoring it. 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. Piercing the corporate veil, financial responsibility, and the limits. Lijalem enyew, the doctrine of piercing the corporate veil. The last twenty years of veil piercing scholarship has been largely devoted to empirical analyses of veil piercing cases collected from lexis and westlaw searches. However, the title given to a company of an artificial person having its own legalities does not take away the fact that it is not a human being capable of knowing whats rights and wrong. Piercing the corporate veil is an equitable doctrine that is only appropriate when there are. Pdf lifting of corporate veil or disregarding of the corporate personality is common buzz in the modern corporate arena. But there are cases in which the corporations officers and shareholders could be sued for negligence or for debts. The principles under which the courts can justify lifting the veil is arguably well established by the authorities, as despite the corporate veil was not lifted in this case and the principles are obiter, it appears to be a consensus as to.
The author conducted a comprehensive search for corporate veil. Taxat times tax legislations warrant the lifting of the corporate veil. In exercising their discretion on whether or not to lift or pierce the corporate. The lifting of corporate veil doctrine in hong kong opposed to a corporate shareholder. The three justifications for piercing the corporate veil. Pdf this article explains the concept of piercing the corporate veil doctrine which is. Company law lifting of corporate veil with reference to leading case shagun singh 15. 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. Lifting the veil doctrine exists as a check on the principle that, in general, investor shareholders should not be held liable for the debts of their corporation beyond the value of their investment. 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. Download page essay on lifting the corporate veil limited liability 2020. Traditionally, most veilpiercing cases were premised on the alter ego theory. Company as separate legal entity the company as a separate entity was firmly established in the landmark decision in salomon v.
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