To lift or not to lift the corporate veil the unfinished story. Lifting of corporate veil by advocate sanyog vyas youtube. In its recent judgment in balwant rai saluja, a threejudge bench of the supreme court has considered a number of important questions relating to when, if ever, it is appropriate to lift the corporate veil. By lifting the corporate veil in maby cases the courts have passed orders against the directors of pany. The question of how these aspects will now be applied and enforced is the focus of this article. However, as illustrated by the cases discussed in this paper, canadian judges often conflate the two. Piercing the corporate veil applying founding company law principles to modern family law cases the recent court of appeal decision in petrodel resources limited v prest has for now clarified the basis on which courts in matrimonial cases are entitled to look behind the principle of. This is strictly not a case of lifting the corporate veil but one where for non compliance with certain provisions in the i. In prest, lord sumption attempted to clarify the doctrine as follows. I then discuss the courts power to order pooling in the case of corporate groups. Lifting the veil of incorporation in confiscation cases. Lifting the corporate veil the corporate veil metaphorically symbolises the distinction between the company as a separate legal entity and the shareholders who own the shares in the company. 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. Although circumstances would often arise where it would be unfair for an individual to be able to take advantage of the corporate veil, that alone would not be enough for the court to take action see page 536.
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. Lifting or piercing of corporate veil circumstances in. Factors relevant to piercing the corporate veil under massachusetts law. Since then it is being followed till the present date. The effect of lifting or piercing the corporate veil is that the shareholders, rather than the company, are regarded as the relevant actors on whom liability of the obligations of the company are placed. Limitation the paper only deals about lifting of corporate veil in general and the instances in which court can life it. By comparison, corporate takeover and hostile takeover among the hottest corporate law topics in recent years appear in fewer than 300 cases. The english courts have been often asked to disregard the separate legal personality of a company and its shareholders. History of the doctrine of corporate veil the doctrine of corporate veil has been originated in 1897 with the solomon case. Corporate personality has been described as the most pervading of the fundamental principles of company law. This was a case involving a foreign judgment against a company. Section 218 of the 2008 companies act extends liability, while s 209 codifies the doctrine of piercing the corporate veil. After the bhopal gas leak disaster case, the lifting of corporate veil has been escalated. Chinnapa reddy had stressed that the corporate veil should be lifted where the associated companies are inextricably connected as to be in reality, part of one concern.
Piercing the corporate veil in australia melbourne law school. Piercing the corporate veil under the new companies act. 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 acquire debt and to pay out profits, the ability to hold and transfer property, the ability. Readers may recall that we had previously discussed lord sumptions magisterial judgment on this point in petrodel v prest. Just as a natural person cannot be held legally accountable for the conduct or obligations of another person, unless they have expressly or implicitly assumed responsibility. Corporate veil zimbabwe legal information institute. Lifting of corporate veil with reference to leading cases. However, there has not been a comprehensive empirical study of the australian cases relating to this doctrine. Farrar, john piercing the corporate veil in favour of creditors and. It constitutes the bedrock principle upon which company is regarded as. It may hold the stockholders personally liable for the firms obligations under the legal concept of lifting the corporate veil.
In such cases the courts will lift the corporate veil and investigate the activities of the company. Term paper on lifting of corporate veil under judicial. These cases are analysed along various dimensions and trends in the case law will be deduced. 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.
Sec 179 1 of the income tax act is the one provision which fit in well with the concept of a lifting the corporate. From 1897to 1966, was called the period of early 24. However one area where the courts have been particularly reluctant to recognize the concept of. The survey begins with a pool of 119 cases in which the corporate veil doctrine is mentioned or in some way implicated. The lifting of corporate veil doctrine in hong kong. The concept of lifting of corporate veil scrutinizes, the human agency behind the scenes of the company, to determine the real culprit committing such offences. An anatomy of the grounds of lifting the corporate veil symbiosis. In doing the same, the courts have evolved the concept of lifting or piercing the corporate veil.
Piercing the corporate veil ignores the legal persona of the corporation this paper will focus on the alter ego category of veil piercing rather than veil piercing based on the law of agency. Michael2 abstract from the age long decision of house of lords in the case in salomon v. To offer a full account of the exceptions to the corporate personality doctrine, this paper also. The most common and debated reason for potentially piercing the veil is the fraud exception, ie. This court will disregard the corporate form only in the exceptional case. Analysis of the development is done by looking at the veil piercing doctrines under u. This paper is written as a comparative study of the development of the corporate veil piercing doctrine throughout the years. Union of india,7 the court observed that the corporate veil may be lifted and the independence of the corporate entity disregarded, in cases where the principle of corporate personality is flagrantly opposed to justice, convenience, or in the interest of revenue. A similar search of lexis injuly, 1990 also turned up about 2000 cases. The supreme court case prest v petrodel resources ltd 20 2 ac 415 addresses the issue of whether, and if so in what way, the court is competent to pierce the corporate veil save any specific. However, the courts have not always applied the separate legal entity principle as the salomon case. Lifting of corporate veil or disregarding of the corporate personality is common buzz in the modern corporate arena. 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.
In the interests of justice, in an appropriate case, a party wronged by actions taken by an owner shielded by the veil of a corporate shell may. Over time, case law has emerged supporting the doctrine of piercing the corporate veil, enabling courts to look behind a companys separate legal personality. From peeping behind the corporate veil, to ignoring it. Although the supreme court has not endorsed precisely the same. It constitutes the bedrock principle upon which company is regarded as an entity distinct from the shareholders constituting it. Meaning of lifting or piercing of the corporate veil. Piercing the corporate veil applying founding company law. 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. When and how the corporate veil is to be lifted is a matter which would be required to be decided on the. The indian supreme court on lifting the corporate veil. Needless to say that the doctrine of lifting 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. The court of appeal rejected an unprincipled and broad brush approach and listed some nonexhaustive factors to be considered. 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.
Generally, a corporation is a separate legal entity from its shareholder and the shareholder is not liable for corporate debts, including judgments against the corporation. To lift or not to lift the corporate veil the unfinished. Company law lifting of corporate veil with reference to leading case shagun singh 15. 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. Slaughter and may piercing the corporate veil and fraud. In a number of circumstances, the court will pierce the corporate veil or will.
In another landmark decision of the supreme court in new horizons ltd. Approach of the uk court in piercing corporate veil. However, where the relevant test has been satisfied, the courts have shown a willingness to pierce the veil. The human resourcefulness, however, began utilizing the veil of corporate personality explicitly as a shroud for misrepresentation or despicable direct. Company as separate legal entity the company as a separate entity was firmly established in the landmark decision in salomon v. By lifting the corporate veil in maby cases the courts have passed orders against the directors of the.
Part iii analyses the common law grounds of lifting the veil that have been frequently proposed, to determine the underlying reasons for. The paper examines case law and statutory provisions related to lifting the corporate veil. Our survey finds that shareholders were found liable for corporate debts in over 75% of cases, a significantly higher rate of veillifting than in. 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. Act, the liquidator is personally held liable for the tax obligations of the company in liquidation. In some cases the corporate veil has not been lifted prime examples of that are adams v. Rationale the paper aims to study and analyze the concept of lifting the corporate veil and the instances in which court can lift it. Part i of this paper will briefly survey the concept of company as a separate entity. The company, in the contemplation of law, is a person distinct from the shareholders. Lifting the veil of incorporation under common law and.
Pdf approach of the uk court in piercing corporate veil. A critical analysis of common law principles in lifting the corporate veil. 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. The term piercing the corporate veil means disregarding the separate personality of a company and occurs when the court applies an exception to the rule in saloman v.
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