What is the meaning of lifting the corporate veil?
Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders.
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.
What is a veil incorporation?
By definition, piercing the veil of incorporation is a legal term used in circumstances where shareholders or directors of companies are made liable for the debt of the company or where the shareholders are treated as one with the company.
Why is lifting of corporate veil 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.
What is lifting of corporate veil under Companies Act 2013?
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.
Why is the veil of incorporation lifted explain with cases?
Judicial Provisions Or Grounds For Lifting The Veil- FRAUD OR IMPROPER CONDUCT- The Courts have been more that prepared to pierce the corporate veil when it fells that fraud is or could be perpetrated behind the veil. The Courts will not allow the Salomon principal to be used as an engine of fraud.
What is meant by corporate veil of a company?
The Corporate Veil Theory is a legal concept which separates the identity of the company from its members. Hence, the members are shielded from the liabilities arising out of the company’s actions.
Why lifting of corporate veil is important?
Sometimes these corporate veils are used as a vehicle of fraud, or evasion of tax. To prevent unjust and fraudulent acts, it becomes necessary to lift the veils to look into the realities behind the legal facade and to hold the individual member of the company liable for its acts.
Why is corporate veil important?
The corporate veil is a legal concept which separates the actions of an organization to the actions of the shareholder. Moreover, it protects the shareholders from being liable for the company’s actions. In this case a court can also determine whether they hold shareholders responsible for a company’s actions or not.
What is corporate veil example?
If a business does not separate corporate identity, or the identity of business as a legal person, from its owner’s identity. An example of this is a business owner mixing personal and corporate identity by using company funds for personal expenses.