LPC NOTES Lifting Of The Corporate Veil COMPLETED 2023.

LPC NOTES Lifting Of The Corporate Veil COMPLETED 2023. Lifting Of The Corporate Veil ABSTRACT From the juristic point of view, a company is a legal person distinct from its members [Salomon v. Salomon and Co. Ltd. (1897) A.C 22]. This principle may be referred to as the ‘Veil of incorporation’. The courts in general consider themselves bound by this principle. The effect of this Principle is that there is a fictional veil between the company and its members. That is, the company has a corporate personality which is distinct from its members. But, in a number of circumstances, the Court will pierce the corporate veil or will ignore the corporate veil to reach the person behind the veil or to reveal the true form and character of the concerned company. The rationale behind this is probably that the law will not allow the corporate form to be misused or abused. In those circumstances in which the Court feels that the corporate form is being misused it will rip through the corporate veil and expose its true character and nature disregarding the Salomon principal as laid down by the House of Lords. Broadly there are two types of provisions for the lifting of the Corporate Veil- Judicial Provisions and Statutory Provisions. Judicial Provisions include Fraud, Character of Company, Protection of revenue, Single Economic Entity etc. while Statutory Provisions include Reduction in membership, Misdescription of name, Fraudulent conduct of business, Failure to refund application money, etc. 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. IntroductionIncorporation of a company by registration was introduced in 1844 and the doctrine of limited liability of a company followed in 1855. Subsequently in 1897 in Salomon v. Salomon & Company, the House of Lords effected these enactments and cemented into English law the twin concepts of corporate entity and limited liability. In that case the apex Court laid down the principle that a company is a distinct legal person entirely different from the members of that company. This principle is referred to as the ‘veil of incorporation’. The chief advantage of incorporation from which all others follow is the separate entity of the company. In reality, however, the business of the legal person is always carried on by, and for the benefit of, some individuals. In the ultimate analysis, some human beings are the real beneficiaries of the corporate advantages, “for while, by fiction of law, a corporation is a distinct entity, yet in reality it is an association of persons who are in fact the lOMoARcPSD| beneficial owners of all the corpo