Lifting of Corporate veil:
It refers to the situation where a shareholder is held liable for its corporation’s debts despite the rule of limited liability and/of separate personality. The veil doctrine is invoked when shareholders blur the distinction between the corporation and the shareholders.
Thereof, when can the court lift the corporate veil?
Avoiding a legal obligation
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.
In respect to this, what are the exceptions to lifting of corporate veil?
Broadly there are two types of provisions for the lifting of the Corporate Veil– Judicial Provisions and Statutory Provisions. Judicial Provisions include Fraud, Character of Company, Protection of revenue, Single Economic Entity etc.
How do you lift the veil of incorporation?
The principle of the separate legal personality, however, is not immune from abuse. As such, in very exceptional circumstances, the Court will ignore the separate legal personality of a company and look to the shareholders / controllers of the company. This is commonly referred to as “lifting the corporate veil”.
