Veil Of Incorporation
LIFTING OF THE CORPORATE VEIL
INTRODUCTION
• The principle of separate corporate personality as confirmed in
Saloman v. A Saloman & Co. Ltd. [1897] forms the corner-stone of co. law. • The recognition that a co. is a separate legal entity distinct from its shareholders is often expressed as the veil of incorporation.
• Incorporation of a co. casts a veil over the true controllers of the co, a veil through which the law will not usually penetrate.
• Once a co. is incorporated the courts usually do not look behind the veil to inquire why the co. was formed or who really controls it.
• There are however instances when the law will disregard or look behind the corporate personality and have regard to the reality of the situation.
•
Lifting or piercing the corporate veil mean in effect ignoring the fact that the business is carried on by a co. and looking behind the co. to see who is actually operating it i.e. looking at the reality of the situation.
INTRODUCTION (Cont.)
• This would involve treating the rights or liabilities or activities of the co. as the rights or liabilities or activities of its shareholders, for example treating the business of a co. as that of its principal shareholder.
• The court has recognised that an inflexible application of the concepts of separate entity and limited liability, with all that they imply, can lead to undesirable consequences.
• Lifting the corporate veil is sometimes expressly authorised by statute and sometimes it is adopted by the courts. • There various statutory provision that allow the court to lift the corporate veil.
• There occasions when the court must be prepared to go behind the corporate veil since lifting the corporate veil is an exception and not a general principle of co. law
INTRODUCTION (Cont.)
• It is generally recognised that there is no overall principle as to when the courts will lift or pierce the corporate veil.
• All the cases cannot be reduced to a single principle.
• It is therefore difficult
INTRODUCTION
• The principle of separate corporate personality as confirmed in
Saloman v. A Saloman & Co. Ltd. [1897] forms the corner-stone of co. law. • The recognition that a co. is a separate legal entity distinct from its shareholders is often expressed as the veil of incorporation.
• Incorporation of a co. casts a veil over the true controllers of the co, a veil through which the law will not usually penetrate.
• Once a co. is incorporated the courts usually do not look behind the veil to inquire why the co. was formed or who really controls it.
• There are however instances when the law will disregard or look behind the corporate personality and have regard to the reality of the situation.
•
Lifting or piercing the corporate veil mean in effect ignoring the fact that the business is carried on by a co. and looking behind the co. to see who is actually operating it i.e. looking at the reality of the situation.
INTRODUCTION (Cont.)
• This would involve treating the rights or liabilities or activities of the co. as the rights or liabilities or activities of its shareholders, for example treating the business of a co. as that of its principal shareholder.
• The court has recognised that an inflexible application of the concepts of separate entity and limited liability, with all that they imply, can lead to undesirable consequences.
• Lifting the corporate veil is sometimes expressly authorised by statute and sometimes it is adopted by the courts. • There various statutory provision that allow the court to lift the corporate veil.
• There occasions when the court must be prepared to go behind the corporate veil since lifting the corporate veil is an exception and not a general principle of co. law
INTRODUCTION (Cont.)
• It is generally recognised that there is no overall principle as to when the courts will lift or pierce the corporate veil.
• All the cases cannot be reduced to a single principle.
• It is therefore difficult