What do you mean by lifting of the corporate veil?

Here, lifting the corporate veil under the Companies Act, 2013 means ignoring that a company is a separate legal entity and has a corporate personality. Lifting of corporate veil as per Companies Act, 2013 ignores the separate identity of the company and looks back at the true owners who are in control of the company.

When can you lift corporate veil?

FRAUD OR IMPROPER CONDUCT– the most common ground when the courts lift the corporate veil is when the members of the company are indulged in fraudulent acts. The intention behind it is to find the real interests of the members.

What is an example of lifting of the corporate veil?

The Court may lift the veil if the company concerned is ‘using’ the veil to avoid fulfilling legal obligations. For example, if a company owes a creditor money but transfers their assets to another entity to avoid payment, the Court can lift the veil.

Why lifting of corporate veil is important?

Introduction To Lifting of Corporate Veil. The corporate veil is a concept which provides that the personality of a company has to be treated separately from that of its shareholders. It also protects the shareholders from being held personally liable for the company’s debts and other obligations.

When might a court pierce the corporate veil under common law?

Three circumstances where commentators maintain that the corporate veil ought to be pierced will now be considered: where the veil is pierced to impose liability on the directors of the company; where the company is closely held; and where the company has committed a tort.

Who can pierce the corporate veil?

The court will not agree to piercing the corporate veil in just any situation, since the entire purpose of incorporating is to protect owners and allow the business to operate as its own independent “person.” However, the court will pierce the corporate veil in situations where the owners, directors or shareholders of …

What are the 2 ways through which the veil can be lifted?

As a result, there are two main ways through which a company becomes liable in company or corporate law: firstly through direct liability (for direct infringement) and secondly through secondary liability (for acts of its human agents acting in the course of their employment).

How can the veil of a company be lifted?

The court will lift the veil of incorporation of any company to find out who was behind the fraudulent and improper conduct. This would be necessary where the canopy of legal entity is used to defeat public convenience, justify wrong, perpetuate and protect fraud and crime….

What is mean by corporate veil in company law?

The term Corporate Veil refers to the concept that members of a company are shielded from liability connected to the company’s actions. If the company incurs any debts or contravenes any laws, the corporate veil concept implies that members should not be liable for those errors.

Why does the court lift the veil of incorporation?

PUBLIC INTEREST- The Courts may lift the veil to protect public policy and prevent transactions contrary to public policy. The Courts will rely on this ground when lifting the veil is the most ‘just’ result, but there are no specific grounds for lifting the veil.

Which is not a case of lifting of corporate veil?

The liquidator personal liability is limited to the amount notified by the Income Tax officer under section 178 (2) if so notified. This is strictly not a case of lifting the corporate veil but one where for non- compliance with certain provisions in the I.T.