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SUBMITTED
TO :-
DR.SUBIA KHAN
CONCEPT
 I n T h e E y e s O f L a w, A C o m p a n y I s A L e g a l P e r s o n W i t h A
Separate Entity Distinct From Its Members Of
S h a r e h o l d e r s . I n E s s e n c e I t M e a n s T h a t T h e r e I s A Ve i l O r
Curtain Separating The Legal Entity Of The Company
From Its Members Or Shareholders.
 When Any Fraudulent And Dishonest Use Is Made Of The
L e g a l E n t i t y, T h e I n d i v i d u a l s C o n c e r n e d W i l l N o t B e
A l l o w e d To Ta k e S h e l t e r B e h i n d T h e C o r p o r a t e P e r s o n a l i t y.
The Courts Will Break Through The Corporate Shell And
Apply The Principle Of ‘Lifting Or Piercing The Corporate
Ve i l ' . T h e C o u r t W i l l M a k e T h e M e m b e r s O r T h e
Controlling Persons Liable For Debts And Obligations Of
T h e C o m p a n y.
MEANING…..

 CORPORATE VEIL
A Legal Concept That Separates The
Personality Of A Corporation From The
Personalities Of Its Shareholders, And
Protects Them From Being Personally
Liable For The Company’s
Debts And Other Obligations.
MEANING…..
 LIFTING OF CORPORATE VEIL
At Times It May Happen That The Corporate Personality
O f T h e C o m p a n y I s U s e d To C o m m i t F r a u d s A n d I m p r o p e r
Or Illegal Acts. Since An Artificial Person Is Not Capable
Of Doing Anything Illegal Or Fraudulent, The Façade Of
C o r p o r a t e P e r s o n a l i t y M i g h t H a v e To B e R e m o v e d
To I d e n t i f y T h e P e r s o n s W h o A r e R e a l l y
G u i l t y. T h i s I s K n o w n A s ‘ L i f t i n g O f
C o r p o r a t e Ve i l ’ .
WHEN CAN BE THE VEIL LIFTED?

 T h e re A re N o H a r d A n d F a s t R u l e s F o r T h e
A p p l i c a b i l i t y O f T h i s D o c t r i n e , H o w e v e r, O v e r A
P e r i o d O f Ti m e , C o u r t s A n d L e g i s l a t u re s
T h ro u g h o u t T h e G l o b e H a v e A t t e m p t e d To N a r ro w
Down

Scope.
LAW CAN LIFT THE CORPORATE
VEIL UNDER TWO HEADS :-

UNDER STATUTORY
PROVISIONS

UNDER JUDICIAL
INTERPRETATION
U N D E R S TAT U T O R Y
PROVISIONS

 T h e C o m p a n i e s A c t , 2 0 1 3 , I n t e g r a t e d Wi t h
Va r i o u s P ro v i s i o n s , P o i n t s O u t T h e P e r s o n
L i a b l e F o r A n y S u c h I m p ro p e r / I l l e g a l A c t i v i t y
As “Officer Who Is In Default” Under Section
2(60) Of The Act, And Also Includes People
H o l d i n g T h e P o s i t i o n s O f D i re c t o r s A n d K e y -
m a n a g e r i a l P e r s o n n e l ’s .
A FEW INSTANCES OF LIFTING OF THE
CORPORATE VEIL CASES
UNDER STATUTORY PROVISIONS

 A. Misstatement In Prospectus:
Under Section 26 (9), Section 34 And Section 35 Of The Companies Act, It Is A
Punishable Offence To Furnish Untrue Or False Statements In Prospectus Of A
Company Offering Securities For Sale.
 B. Misdescription Of Company’s Name:
Under Indian Companies Act, 2013, Provides That If Any Officer Of The Company
Or Person Acting On Its Behalf Signs Or Authorizes To Be Signed On Behalf Of The
Company Any Bill Of Exchange, Promissory Note, Endorsement, Cheque Or Order
For Money Or Goods In Which The Companies Name Is Not Mentioned In Legible
Letters, He Is Liable To Fine And He Is Personally Liable To The Holder Of The
Instrument Unless The Company Has Already Paid The Amount.
 C . F a i l u r e To R e t u r n A p p l i c a t i o n M o n e y :
Under Section 39 (3) Of The Companies Act, gives
Provision Against Allotment Of Securities If The Sum
Payable On Application Is Not Received Within A Period Of
Thirty Days From The Date Of Issue Of The Prospectus
Then The Officers In Default Are Fined.
 D. For Investigation Of Ownership Of Company:
Under Section 216 Of The Act, The Central Government Is
A u t h o r i z e d To A p p o i n t I n s p e c t o r s To I n v e s t i g a t e A n d
R e p o r t O n M a t t e r s R e l a t i n g To T h e C o m p a n y, A n d I t s
M e m b e r s h i p F o r T h e P u r p o s e O f D e t e r m i n i n g T h e Tr u e
Persons Who Are Financially Interested In The Success Or
F a i l u r e O f T h e C o m p a n y.
UNDER JUDICAL INTERPRETATION

 A p a r t F ro m T h e M a n d a t o r y S t a t u t o r y P ro v i s i o n s
P ro v i d e d B y T h e C o m p a n i e s A c t , 2 0 1 3 Wi t h R e g a r d s To
O f f e n c e s B e h i n d L i f t i n g O f C o r p o r a t e Ve i l , T h e
L e g i s l a t u re H a s A l s o P l a y e d A n I m p o r t a n t R o l e To
M a k e S u re G u i l t y P e r s o n I s P o i n t e d To L i f t C o r p o r a t e
Ve i l .
A FEW INSTANCES OF LIFTING OF THE
CORPORATE VEIL CASES
UNDER STATUTORY PROVISIONS

 A.Tax Evasion:
It’s The Duty Of Every Earning Person To Pay Taxes. Company Is No Different Than
A Person In Eyes Of Law. If Anyone Attempts To Unlawfully Avoid This Duty, He Is
Committing An Offence. What Rule Applies To A Human Being Also Applies To A
Company.
 B. Public Interest/Public Policy
Where The Conduct Of The Company Is In Conflict With Public Interest Or Public
Policies, Courts Are Empowered To Lift The Veil And Personally Hold Such Persons
Liable Who Are Guilty Of The Act. To Protect Public Policy Is A Just Ground For
Lifting The Corporate Personality.
 C.Agency Companies:-
Where It Is Expedient To Identify The Principal And Agent
Concerning An Improper Action Performed By The Agent, The
Corporate Veil Maybe Neglected.
 D. Liability For Ultra-vires Acts:-
Every company is bound to perform in compliance of it’s
memorandum of association, articles of association, and the
Companies Act, 2013. Any action done outside purview of either is
said to be “ultra-vires” or improper or beyond the legitimate scope.
Such operations of the company can be subjected to penalty.
 E. Determination Of Enemy Character:-
The Purpose Behind Formation Of Company Is Self-profit. A Company Will Not
Attempt To Do Good Towards Society Consciously. However, It May opt To Cause
Damage Instead.
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