Skip to main content

Corporate Veil

 Corporate Veil

The company has its characteristics, once a company is incorporated, holds a separate legal entity in the eyes of the law. The company has its seal, it can enter into a contract, purchase or sell of property or have a bank account and sue or get sued, thus a company is a juristic person different from the person who constitutes it.

Though the company has a separate entity it is incorporated by the person, these people are safe behind the veil, known as the corporate veil.  The corporate veil is defined as, A legal concept that separates the personalities of its shareholders, and protects them from being personally liable for the company's debts and other obligations.

Lifting the corporate veil means disregarding the corporate personality and looking behind the real person who is in control of the company.  In DDA v. Skipper Construction Co . Pvt. the supreme court referred to the principle of lifting the corporate veil. The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or defraud people. The corporate veil indisputably can be pierced when the corporate personality is found to be opposed to justice, convenience, and interest of the revenue or workman or against the public interest.


Case ; Saloman v. Saloman & co. ltd. In this case, Salomon was a boot and shoe manufacturer. His business was in sound condition. He incorporated a company named Saloman & co ltd. To carry on his business. There were 7 subscribers to the memorandum were Saloman, his wife, his 2 sons, and his daughter this makes it clear that the company's owners were the family members of Saloman. The unsecured credit raised the question that there Is no company as in the board only his family members and therefore the company has no independent existence was contrary to the spirit and meaning of the company law.  The house of lords refused these arguments on the ground that after incorporation the Salomon and co. ltd became in law a different person altogether from its members with its rights and liabilities. In this case, the house of lords has made it clear that after incorporation a company is conferred on a legal entity different from the motives or conduct of its member and promoters.

There are two types of lifting of the corporate veil, one is known as statutory lifting, which means that if a company violates the companies act 2013 and the act provides for the lifting of the veil for the same then it is termed be statutory lifting and second one thing, known as, the judicial lift is known as the if the company violates the companies act 2013 and the act does not provide for the lifting of veil then the judges can order the lifting of veil which is known as judicial lifting.

Case; Re Sir Dinshaw Maneckji  Petit Bari, in this case, it was held, the company was formed by the assessee to evade tax and the company was nothing more than the assessee himself. it did undertake any business but was created simply as a legal entity to ostensibly receive the dividends and interests and to hand them over to the assessee as pretended loans.
Labels:

Comments

Post a Comment

Popular posts from this blog

Concept of constitutionalism

  Concept of constitutionalism Who Started Constitutionalism? John Locke - The English Bill of Rights is a foundational constitutional document that helped inspire the American Bill of Rights. Political theorist  John Locke  played a huge role in cementing the philosophy of constitutionalism.  Constitution is a written law which describes the structure of Government, the rules according to which the Govt. must work and the boundaries within which the Govt. must work. Constitutionalism   can be defined as the doctrine that governs the legitimacy of government action, and it implies something far more important than the idea of legality that requires official conduct to be in accordance with pre-fixed legal rules. Constitution constitution is the document that contains the basic and fundamental law of the nation, setting out the organization of the government and the principles of the society. Basic norm (or law) of the state; System of integration and organi...
Post a Comment
Read more

business tips

1. Have a clear vision for your business and strive to achieve it. 2. Hire great people and give them ownership in the company. 3. Provide excellent customer service. 4. Establish yourself as an expert in your field. 5. Develop relationships with key suppliers, customers, and partners. 6. Keep track of your finances and invest in marketing and innovation. 7. Utilize digital platforms to reach a larger audience. 8. Take calculated risks and back yourself. 9. Continuously strive to improve your products and services. 10. Make customer satisfaction your priority.
Post a Comment
Read more

Effects of Non-Registration

 Effects of Non-Registration The Companies Act, 2013 evidently highlights that the main essential for any organization to turn into a company is to get itself registered. A company cannot come into existence until it gets registered. But no such obligation has been imposed for firms by the Indian Partnership Act, 1932. If a firm is not registered it does not cease to be called as a firm, it still exists in the eyes law. Certainly, such a big advantage is not absolute but is subjected to a lot of limitations which we will study further. Non-registration of a firm simply means that the business skips the formalities of incorporation and ceases to exist in the eyes of the law. section 58 of the Indian Partnership Act, 1932 deals with the procedure of incorporation. Likewise, the meaning of non-registration is the exact opposite of registration, meaning when a firm does not go through the procedure of incorporation or start carrying on activities without getting registered. Effects of ...
Post a Comment
Read more