Piercing The Veil Of Incorporation Case Study
5. The Law of Piercing the Veil of Incorporation
“Piercing the corporate veil” refers to the judicially imposed exception to this rule by which courts disregarded the separateness of the company and consider a shareholder responsible for the company’s action as if it were the shareholder’s own. A fundamental rule of corporate law is that shareholders in an organization are not liable for the obligations of the enterprise beyond the capital that they contribute in exchange for their shares.
It refers to a situation where the judiciary or the legislature has decided that the separation of the personality of the corporation and the members is not to be maintained the viel of incorporation is in this way said to be lifted. Ebrahimi v. Westbourne …show more content…
The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s separate legal personality.”
In the American tradition, it is known as lifting the veil of incorporation or the disregard by the courts of the company’s corporate personal or separate existence from its shareholders. In the situation where the veil is lifted, the law either goes behind the corporate personality to the individual members or ignores the separate personality of each company in favour of the economic entity constituted by a group of associated …show more content…
Milwaukee Refrigerator Co. , the court said that:
“A corporation will be looked upon as a legal entity as a general rule but when the motion of legal entity is used to detect the public convenience, justify wrong, protect fraud or defend crime, the law will regard the corporation as an association of persons.”
The theory of lifting of corporate veil cannot be ignored in the circumstance wherein fraud, oppression and misconduct etc. required to be detected by the court. These are the circumstances when the court will lift the corporate veil of a company with the view to examine the actual persons who stand behind it. However, it is at the discretion of the court whether to lift the corporate veil of incorporation or not, because it depends upon the circumstances, but in some situations it is highly desirable for the court to pierce the corporate veil.
The legislature and the courts have allowed the corporate veil to be pierced in the following circumstances:-
1. Ascertainment of character of company:
The court is required to lift the veil of corporate personality to examine the realities that lie behind the company. The character of company cannot be determined without lifting the corporate
“Piercing the corporate veil” refers to the judicially imposed exception to this rule by which courts disregarded the separateness of the company and consider a shareholder responsible for the company’s action as if it were the shareholder’s own. A fundamental rule of corporate law is that shareholders in an organization are not liable for the obligations of the enterprise beyond the capital that they contribute in exchange for their shares.
It refers to a situation where the judiciary or the legislature has decided that the separation of the personality of the corporation and the members is not to be maintained the viel of incorporation is in this way said to be lifted. Ebrahimi v. Westbourne …show more content…
The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s separate legal personality.”
In the American tradition, it is known as lifting the veil of incorporation or the disregard by the courts of the company’s corporate personal or separate existence from its shareholders. In the situation where the veil is lifted, the law either goes behind the corporate personality to the individual members or ignores the separate personality of each company in favour of the economic entity constituted by a group of associated …show more content…
Milwaukee Refrigerator Co. , the court said that:
“A corporation will be looked upon as a legal entity as a general rule but when the motion of legal entity is used to detect the public convenience, justify wrong, protect fraud or defend crime, the law will regard the corporation as an association of persons.”
The theory of lifting of corporate veil cannot be ignored in the circumstance wherein fraud, oppression and misconduct etc. required to be detected by the court. These are the circumstances when the court will lift the corporate veil of a company with the view to examine the actual persons who stand behind it. However, it is at the discretion of the court whether to lift the corporate veil of incorporation or not, because it depends upon the circumstances, but in some situations it is highly desirable for the court to pierce the corporate veil.
The legislature and the courts have allowed the corporate veil to be pierced in the following circumstances:-
1. Ascertainment of character of company:
The court is required to lift the veil of corporate personality to examine the realities that lie behind the company. The character of company cannot be determined without lifting the corporate