Topics: Corporation, Legal entities, Types of companies Pages: 14 (3783 words) Published: August 28, 2013
A statutory provision is a clause in a statute providing for a particular manner. It is a provision, whether of a general or a special nature, contained in, or in any document made or issued under, any act whether of a general or special nature. 1. LIFTING OF THECORPORATE VEIL BY: Amandeep Kaur BBA Sem. 4 2. CONCEPT• In the eyes of law, a company is a legal person with a separate entity distinct from its members of shareholders. In essence it means that there is a veil or curtain separating the legal entity of the company from its members or shareholders.• When any fraudulent and dishonest use is made of the legal entity, the individuals concerned will not be allowed to take shelter behind the corporate personality. The Courts will break through the corporate shell and apply the principle of ‘lifting or piercing the corporate veil’. The Court will make the members or the controlling persons liable for debts and obligations of the company. 3. law will lift thecorporate veil: Under statutory provisions Under judicial interpretation 4. UNDER STATUTORY PROVISIONS  Reduction of the number of members below statutory minimum  For establishing the relationship of holding and subsidiary company  For facilitating the task of an inspector to investigate th6. Lifting of Corporate VeilLifting of Corporate Veil As the company isAs the company is a separate legala separate legalentityentity , is has been provided with a, is has been provided with aveil, compared to that of individualsveil, compared to that of individualswho are managing the company.who are managing the company. But if the court feels that such veilBut if the court feels that such veilhas to been used for anyhas to been used for any wrongfulwrongfulpurposepurpose, the court lifts the corporate, the court lifts the corporateveil and makes theveil and makes the individual liableindividual liablefor such acts which they should notfor such acts which they should nothave done or doing in the name ofhave done or doing in the name ofthe companythe company 7. Circumstances to lift theCircumstances to lift thecorporate veil…corporate veil…The corporate veil can be lifted eitherThe corporate veil can be lifted eitherunder theunder the Statutory provisionsStatutory provisions oror Judicial interpretationsJudicial interpretationsThe statutory provisions areThe statutory provisions areProvided under the CompaniesProvided under the CompaniesAct, 1956Act, 1956The other circumstances are decidedThe other circumstances are decidedthrough Judicial interpretations, whichthrough Judicial interpretations, whichare based on facts of each case as perare based on facts of each case as perthe decisions of the courtthe decisions of the court 8. Statutory circumstances forStatutory circumstances forlifting the corporate veillifting the corporate veil Reduction in membership-Reduction in membership- Less thanLess thanseven in public company and lessseven in public company and lessthan two if it is a private companythan two if it is a private company Failure to refund application money-Failure to refund application money-After the issue of shares to theAfter the issue of shares to thepubic, the company has to pay backpubic, the company has to pay backthe initial payment to thethe initial payment to theunsuccessful applicants (SEBIunsuccessful applicants (SEBIGuidelines- 130 Days), if they fail toGuidelines- 130 Days), if they fail todo so, the corporate veil can bedo so, the corporate veil can belifted.lifted. Mis-description of companies name-Mis-description of companies name-While signing a contract if theWhile signing a contract if thecompany’s name is not properlycompany’s name is not properlydescribed, then the corporate veildescribed, then the corporate veilcan be lifted.can be lifted. 9. continuedcontinued Misrepresentation in the prospectus-Misrepresentation in the prospectus- (Derry(DerryVs Peek) In case of misrepresentation, theVs Peek) In case of misrepresentation,...
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