LIFTING OF CORPORATE VEIL - GROUP PRESENTATION.pptx

Lifting of Corporate Veil

1. LIFTING OF CORPORATE VEIL As per the Companies Act, 2013

2. Quick view 1 2 3 4 5 Team Info A Feature of Company Separate Legal Entity Meaning of Lifting of Corporate Veil Different cases Explanation of cases 2 Lifting of Corporate Veil

3. 3 Presented by :- ● Gaurav Joshi PGP26127 ● Kanika Sahani PGP26158 ● Manya Sharma PGP26187 ● Mayank Bhatt PGP26188 ● Mohit Pandey PGP26198 ● Kushagra Parihar PGP26178 ● Mrigakshi Singh PGP26202 Lifting of Corporate Veil

4. 4 Lifting of Corporate Veil A Feature of Company – Separate Legal Entity The case of Salomon vs. Salomon & Co. Ltd. (1897) established the principle of "separate legal entity," a foundational concept in company law, now reflected in the Companies Act 2013. In this landmark case, Mr. Salomon formed a company, transferring his business to it in exchange for shares. When the company went bankrupt, creditors sought Salomon's personal assets to cover debts. However, the House of Lords ruled that the company was a separate legal entity, distinct from Salomon himself. This decision solidified that a company's liabilities are its own, protecting shareholders from being personally liable beyond their investment.

5. Meaning of Lifting of Corporate veil "Lifting the corporate veil" in company law means that  a court can disregard the legal separation between a company and its owners, holding the shareholders personally liable for the company's actions, typically in situations where the company is used for fraud or to avoid legal obligations . 5 BUSINESS PERSONAL

6. Different cases, when Corporate Veil can be Lifted Trading with enemy To evade or circumvent Tax To act as Agent To avoid legal obligation Company formed for fraud conduct 1 2 3 4 5

7. CASE – 1 Trading with enemy It is true that, unlike a person, a company does not have mind; therefore, it cannot be a friend or foe. It may, however, be characterized as an enemy company, if its affairs are under the control of people of enemy country . Related case : Daimler Co Ltd v Continental Tyre and Rubber Co Ltd (1916) “ ” Lifting of Corporate Veil 7

8. CASE – 2 To evade or circumvent Tax Where the corporate entity is used to evade or circumvent tax, the Court can disregard the corporate entity. Related case : Juggilal vs Commissioner of Income Tax “ ” Lifting of Corporate Veil 8

9. CASE – 3 To act as Agent Company may sometimes be regarded as an agent or trustee of its members, or of another company, and may therefore be deemed to have lost its individuality in favour of its principal. Here the principal will be held liable for the acts of that company. Related case : Merchandise Transport Limited vs. British Transport Commission (1982) “ ” Lifting of Corporate Veil 9

10. CASE – 4 To avoid legal obligation Sometimes the members of a company can create another company/subsidiary company to avoid certain legal obligations. In such cases, piercing the corporate veil allows the Courts to understand the real transactions. Related case : Workmen Employed in Associated Rubber Industries Limited vs. The Associated Rubber Industries Ltd., Bhavnagar and another. “ ” Lifting of Corporate Veil 10

11. CASE – 5 Company formed for fraud conduct Where the device of incorporation is adopted for some illegal or improper purpose, e.g., to defeat or circumvent law, to defraud creditors or to avoid legal obligations. Related case : Gilford Motor Co. vs. Horne “ ” Lifting of Corporate Veil 11