COMPANY LAW

DOCTRINE OF CORPORATE
VEIL
MEANING
 Law regards the company as a separate legal entity.
 It is felt that there is a veil separating the legal entity of a
company from its members.
 It protects the members from the liability of the
company, as the members may plead that under this
doctrine they are not empowered to look inside the
curtain raised by the company.
LIFTING OF CORPORATE VEIL
 Corporate veil may be lifted:
 Under Judicial Interpretation
 Under Statutory Provisions
UNDER JUDICIAL INTERPRETATION
 Determination of character of company
 Company being an artificial person can neither be friend nor
enemy.
 But it may assume an enemy character when the persons in
de facto control of its affairs are residents in an enemy
country or whenever residents are acting under the control of
enemies.
 In such cases court may disregard the corporate fiction and
examine characters of persons in real control of company.
 Relevant Case Law: Daimler Company Ltd. Vs. Continental
Tyre and Rubber Co. Ltd., 1916
 For the benefit of revenues
 Ifthe company has been found to evade taxes or is used to
evade taxes, then to protect the revenues of the state, the
court may lift the corporate veil.
 Relevant Case Law: Re: Sir Dinshaw Maneekjee Petit, 1927
 For checking fraud or improper conduct
 Ifit appears to the court that the company has been formed
for some fraudulent purpose or to defeat the provisions of
law, then the corporate veil will be lifted to look into the
persons responsible.
 Relevant case law: Gilford Motors Company Vs. Horne, 1933
 If required by public interest
 The court may lift corporate veil on the plea of public
interest.
UNDER STATUTORY PROVISIONS
 Misrepresentation in prospectus (Sec. 34)
 Ifon this account any shareholder has suffered any loss, then
the corporate veil may be lifted and every director, promoter
or authorized person responsible for such misrepresentation
shall be punished.
 Failure to return application money (Sec. 39)
 Ifno allotment is made within 60 days, then the money
should be returned within 10 days along with 15% interest
per annum. On failure to do so corporate veil will be lifted.
 Mis - description of name
 Ifwhile any document the name of the company is not
mentioned or is improperly mentioned, it may lead to
personal liability.
 Oppression and mismanagement (Sec. 243)
 Ifa person acts as a MD or other director or manager of a
company in contravention of provisions of this act, then the
corporate veil may be lifted.
 Fraudulent conduct of business {Sec. 271(1) (e)}
 Ifthe affairs of the company are conducted in fraudulent
manner or the company was formed for fraudulent purpose,
then the corporate veil may be lifted and the company will be
wound up.