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. However, this civil file is chosen for the purpose of the. Lord palmer simply enumerates special cases in which the veil has been. The lifting of corporate veil doctrine in hong kong opposed to a corporate shareholder. Lifting or piercing of corporate veil circumstances in. 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. 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. 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.
Meaning of lifting of the corporate veil doctrine of lifting the veil. Approach of the uk court in piercing corporate veil. Some researchers argue that the courts have become increasingly willing to lift the veil. 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. From the age long decision of house of lords in the case in salomon v. 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. 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. Rationale the paper aims to study and analyze the concept of lifting the corporate veil and the instances in which court can lift it. Pdf lifting of corporate veil or disregarding of the corporate personality is common buzz in the modern corporate arena.
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. 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. 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. Pdf approach of the uk court in piercing corporate veil. Principle of lifting the corporate veil there is often talk about how a company is a person in eyes of law. A company is an artificial person having separate legal entity, distinct from its members. Prest decision in the light of the economic analysis of the companys limited liability article pdf available in ssrn electronic journal january 2017. 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. In what circumstances will the cayman courts lift the corporate veil.
The strictness of this approach led to a principle of piercing the corporate veil. The subject of lifting the veil is well kflowfl in the literature on company law. Part i of this paper will briefly survey the concept of company as a separate entity. The paper does not cover the statutory provisions for lifting of corporate veil. Circumstances in which the court can lift the corporate veil. Limitation the paper only deals about lifting of corporate veil in general and the instances in which court can life it. Lifting of corporate veil with reference to leading cases. Piercing the corporate veil, financial responsibility, and the limits. Corporate personality and the veil of incorporation 2. Concept a company is a legal person with a separate entity. Lifting the veil can be used to impose liability upon the shareholders or for other purposes, such as ascertaining appropriate jurisdiction.
Approach of the uk court in piercing corporate veil by. Piercing the corporate veil is an equitable doctrine that is only appropriate when there are. According to palmer, there are seven instances where the corporate veil or the legal personality can be lifted or pierced by the court. Pdf upon acquisition of legal personality a company enjoys certain attributes such as. 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. 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. This shows that there is a veil drawn between the company and its members. 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. 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.
Lifting the corporate veil is an exception to the concept of separate legal entity. 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. Analysis of the development is done by looking at the veil piercing doctrines under u. The doctrine of lifting the corporate veil means ignoring the corporate nature of the body of individuals incorporated as a company. Lifting the veil of incorporation flashcards quizlet. 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. In exercising their discretion on whether or not to lift or pierce the corporate.
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. From peeping behind the corporate veil, to ignoring it. 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. It is this statement of principle that underpinned all of the early attempts to pierce 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. 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.
Second, it is not clear from the judgment itself whether the tax authorities advanced the argument regarding lifting the corporate veil. Empirical study of 30 years of piercing the corporate veil in the age of the llc, 50 wake forest l. A company is treated as if its a human of its own kind. 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. This paper is written as a comparative study of the development of the corporate veil piercing doctrine throughout the years. Principle of lifting the corporate veil legal service india. For example, in vodafone the bombay high court did not consider lifting the corporate veil to impose taxation in case of indirect transfers. The three justifications for piercing the corporate veil. Taxat times tax legislations warrant the lifting of the corporate veil. Corporate veil pierced where owner was sloppy with.
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. Piercing the corporate veil is the most litigated issue in corpo rate law and. Timely file the annual report with the secretary of state. In those circumstances, the corporate veil cannot give any protection to the directors. T he limited liability company in the uae the company is one of the most commonly used and preferred legal form of companies. Lifting of corporate veil with reference to leading cases corporate law reporte. Company law lifting of corporate veil with reference to leading case shagun singh 15. 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. 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. The author conducted a comprehensive search for corporate veil. Definition and analysis of piercing the corporate veil. The lifting of corporate veil doctrine in hong kong.
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. Whether on a summary assessment it will be possible to tell whether the documents. The phrase piercing the corporate veil was described in a 1973 case as now fashionable. Pdf this article explains the concept of piercing the corporate veil doctrine which is. In hare v commissioner of customs and excise,17 it was held that the lifting of corporate veil is. Salomon v salomon involved the principle of separate corporate personality. Term paper on lifting of corporate veil under judicial. Lijalem enyew, the doctrine of piercing the corporate veil. Download page essay on lifting the corporate veil limited liability 2020. If a director continues to trade after this point he will risk having to contribute to the debts of the company. Lifting the corporate veil limited liability pages. Company as separate legal entity the company as a separate entity was firmly established in the landmark decision in salomon v. This is known as lifting or piercing the corporate veil. The paper only deals about lifting of corporate veil in general and the instances in which court can life it.
A degree of clarity has been provided to this area by two recent decisions. Fraudulent actions would not be protected, nor would those where the limited company was simply being used as a facade or a sham. Michael2 abstract from the age long decision of house of lords in the case in salomon v. But there are cases in which the corporations officers and shareholders could be sued for negligence or for debts. Pdf piercing the corporate veil doctrine in poland.
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