CHANDIGARH UNIVERSITY

UNIVERSITY INSTITUTE OF LEGAL STUDIES

LAW( Legal studies)
Corporate Law I
LLT 316
SUMIT SHARMA

CLASSIFICATION OF COMPANY DISCOVER . LEARN . EMPOWER

Prepared By= SUMIT SHARMA
 Course Outcome
CO Number Level
CO1 Students will understand and get to Understand 
know about the provisions relating to
company

CO2 Students will be able to understand the Understand

 
formation of company.
CO3 The students will analyze the Understand
governance of the company.

Prepared By= SUMIT SHARMA

Prepared By= SUMIT SHARMA
Prepared By= SUMIT SHARMA
Prepared By= SUMIT SHARMA
Prepared By= SUMIT SHARMA
What is Corporate Veil?

A company has a separate district legal entity

from the persons who constitute it. Thus, a
company in legal terms is a totally different
person called as an artificial or legal person.
Thus, it a concept which segregates the liability
of company from its makers and protects them
from being personally liable
Prepared By= SUMIT SHARMA
What do you understand by Doctrine of Piercing Corporate Veil?

A Company being an artificial person can’t act on its own. Thus, if and when it performs
any such act which is against public morality or against its articles of association, the
court will break the corporate cloak and look into corporate entity and will eliminate
any difference between the corporate entity and its constituent members.

Prepared By= SUMIT SHARMA

Lifting of corporate veil

• In Life Insurance Corporation of India v. Escorts Ltd

• the Supreme Court held that
• “While it is firmly established ever since in Salomon v.
Salomon that a company is an independent and legal
personality distinct from the individuals who are its
members, the corporate veil may be lifted, the corporate
personality may be ignored and the individual members
recognised for who they are in certain exceptional
circumstance”
Prepared By= SUMIT SHARMA
Circumstances in which courts may lift the
corporate veil
Under Statutory Provisions:

The Companies Act, 2013

Misstatements in Prospectus(Section 34-35)

Reduction of membership below statutory minimum

Fraudulent conduct

Inducing persons to invest money in company

Furnishing false statements

Prepared By= SUMIT SHARMA

Judicial Interpretation:

Where the medium of a company has been used for

committing fraud or improper conduct, courts have
lifted the veil and looked at the realities of the situation.

Prepared By= SUMIT SHARMA

Protection of Revenue:

Many a time, a company is formulated in to get an ostensible

benefit in the garb of loans and revenue. To tackle such
problems, the court may pierce the corporate veil.

Prepared By= SUMIT SHARMA

Case study
• Daimler Company, Limited Appellants; v. Continental Tyre and
Rubber Company (Great Britain), Limited Respondents.
•  company incorporated in England
• All members belongs from Germany except one (the sect)
• At the time of world war Germany citizens become the members of
enemy country
• Most of the company profit goes to Germany members
• Court in this case applied the doctrine of Lifting the corporate veil

Prepared By= SUMIT SHARMA

 REFERENCE
Text Books

Company law with supplement by Avtar Singh

Company Law Ready Reckoner by R Suryanarayayan
Corporate law containing Company’s Act, 2013 by Ravi Puliani

Prepared By= SUMIT SHARMA

THANK YOU

Prepared By= SUMIT SHARMA