Veil Of Incorporation

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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

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