Lifting the Corporate Veil. Power Point Presentation

"Lifting the Corporate Veil" is a legal concept that refers to the judicial act of disregarding the separate legal personality of a corporation or limited liability company (LLC). Normally, a corporation is considered a legal entity separate from its shareholders or members, meaning that the personal assets of shareholders or members are protected from the liabilities of the corporation. However, there are certain situations where courts may decide to "pierce" or "lift" the corporate veil, holding shareholders or members personally liable for the debts or actions of the corporation.

Here are some common scenarios in which courts might lift the corporate veil:

Fraud or Illegality: If shareholders or members use the corporate structure to perpetrate fraud, evade legal obligations, or engage in illegal activities, courts may disregard the corporate entity and hold those individuals personally liable.

Undercapitalization: If a corporation is formed with insufficient capital to conduct its intended business and meet its foreseeable liabilities, and this lack of capitalization results in harm to creditors or other parties, courts may lift the corporate veil to hold shareholders or members liable.

Failure to Observe Corporate Formalities: Corporations and LLCs are required to observe certain formalities, such as holding regular meetings, maintaining separate financial records, and avoiding commingling of personal and corporate assets. If these formalities are not observed and the corporate structure is used as a mere façade, courts may disregard the corporate entity.

Alter Ego: If there is such a unity of interest and ownership between the corporation and its shareholders or members that the separate personalities of the corporation and the individuals no longer exist, courts may treat the corporation as the alter ego of its owners and hold them personally liable.

Group Enterprises: In some cases, where multiple corporations are closely related or form part of a single economic unit, courts may pierce the corporate veil to achieve equity, particularly if one corporation's actions harm creditors or other stakeholders and the corporate structure is being used to shield culpable parties from liability.

1. 1

2. COMPANY LAW
TOTAL SLIDES 42

3. 1/42
LIFTING OF CORPORATE VEIL
Where a fraudulent & dishonesty is made of the
legal entity, the individuals concerned will not be
allowed to take shelter behind the corporate
personality. The court will break through the
corporate shell & apply the principle of what is
known as “lifting of or piercing through the
corporate veil.
What is Lifting Corporate Veil:
www.seribangash.com

4. 2/42
LIFTING OF CORPORATE VEIL
1.Acompanyintheeyeoflawisregardedasan
entityseparateanddistinctfromitsmembers.Anyof
itsmemberscanenterintocontractswiththecompany
inthesamemanneraswithanyotherindividual.
www.seribangash.com

5. 3/42
LIFTING OF CORPORATE VEIL
2.Furtherashareholderormemberofacompany
cannotbeheldliablefortheactsofthecompanyeven
ifheholdstheentiresharecapital.Thecompany’s
moneyandpropertybelongtothecompany,andnotto
theshareholder.
3.Thereisaveilbetweenshareholders/members
andcompany.
www.seribangash.com

6. Salomon vs Salomon:
4/42
LIFTING OF CORPORATE VEIL

7. Salomon vs Salomon:
5/42
LIFTING OF CORPORATE VEIL

8. Salomon vs Salomon:
6/42
LIFTING OF CORPORATE VEIL
www.seribangash.com

9. 7/42
LIFTING OF CORPORATE VEIL
1.Theprincipleofdifferentiatingthelegalentityofthe
companyfromthatofitsshareholdersmaybe
referredascorporateveil.
2.Ifthelegalentityofthecorporatebodyismisused
forfraudulentpurpose,theindividualsconcerned
willnotbeallowedtotakeshelterbehindthe
corporateentityofthecompany.
www.seribangash.com

10. Courtmayliftthecorporateveilon
followinggrounds:
8/42EXCEPTION OF LIFTING OF
CORPORATE VEIL
www.seribangash.com

11. 1.Determination of Enemy Character of a
Company.
9/42COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
www.seribangash.com

12. 10/42
1.DaimlerColtdwasincorporatedinEnglandforthe
purposeofsellingthemotortyresmanufacturedin
GermanybyaGermanCompany.
2.TheGermanyCompanyheldthebulkofsharesin
DaimlerColtd&allthedirectorswereGermans
residentinGermany.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
www.seribangash.com

13. 11/42
3.DuringthefirstworldwarDiamlerColtdcompany
commencedanactiontorecoveratradedebt.The
houseoflordsheldthattheDaimlerColtdwasan
enemycompanyforthepurposeoftradingbecauseits
effectivecontrolwasinenemyhands.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
www.seribangash.com

14. 12/42
4.Accordinglythecompanywasdebarred
frommaintainingtheaction.Itwouldbe
againstpublicpolicytoallowalienenemiesto
trade.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler Co Ltd Vs Continental Tyre
Rubber Co Ltd.
www.seribangash.com

15. 2.Where Company is a Sham
13/42COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
www.seribangash.com

16. 14/42
1.Horneenteredintoanagreementwithhisemployer
companythataftertheterminationoftheemployment
hewouldnotsolicithisemployer’s.customerfora
certainperiodoftime.
2.Soonaftertheterminationofhisemploymenthe
formedacompanyofwhichthetwoshareholderswere
hiswife&oneanotherperson.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Gilford Motors Co Ltd Vs Horne (1933)
www.seribangash.com

17. 15/42
3.Thecompanysentoutcircularstocustomersofhis
formeremployerinjunctionswasgrantedagainst
Horne&Againstcompanyhehasformedrestraining
themfromsolicitingtheplaintiff’scustomers.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Gilford Motors Co Ltd Vs Horne (1933)
www.seribangash.com

18. 16/42
4.Thecourtheldthecompanywasamereshamfor
theHornetocommitabreachofhisagreementagainst
Solicitation.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Gilford Motors Co Ltd Vs Horne (1933)
www.seribangash.com

19. 3.Prevention of Fraud & Improper Conduct
17/42COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
www.seribangash.com

20. 18/42
1.Lipmanhadcontractedtosellhislandtojones,but
laterchangedhismind.
2.Toevadethecontract,heformedacompany&
soldhislandtoit.
3.Thecourtheldthesellerofland&thecompany
wereone&thesameentity,&madehimsellhis
landtoJones.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Jones Vs Lipman
www.seribangash.com

21. 4.Where company is acting as the agent of
the shareholders
19/42COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
www.seribangash.com

22. 20/42
1.ABritishcompanywasformedwithacapitalof100
shares,outof90shareswereheldbyanAmerican
thedirectorsofUSAfilmCompany,&10shares
wereheldbyanotherdirector,aBritishsubject.
2.Thecompanyproduceafilmcalled“Monsoon”the
productionofwhichwasfinancedbycompany.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Re F.G Films Ltd 1953
www.seribangash.com

23. 21/42
3.Thecourtrefusedtoagreethatthefilmwasmade
byBritishcompany,thecompanywasmerelythe
nomineeoragentofUSAfilmcompany.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Re F.G Films Ltd 1953
www.seribangash.com

24. 5. Protection of Revenue
22/42COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
www.seribangash.com

25. 23/42
1.Dwasawealthymangettinghugedividend&interest
income.Inordertoavoidsupertax,heformedfour
privatecompanies&transferredhisinvestmentsinpart
toeachofthefourcompaniesinexchangeoftheir
shares.
2.Dividendsreceivedwerecreditedintheaccountofthe
company&theamountwashandedbacktohimasa
loan.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Sir Dinshaw Mancekjee Petit
www.seribangash.com

26. 24/42
3.Thushedividedhisincomeinfourpartstotoavoid
taxliability.
4.Thecourtheldthatasthecompaniesdidno
business,thefourcompanieswereformedpurely&
simplyasameansofavoidingtax.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Sir Dinshaw Mancekjee Petit
www.seribangash.com

27. 6. Avoidance of Welfare Legislation
25/42COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
www.seribangash.com

28. 26/42
1.DaimlerColtdwasincorporatedinEnglandforthe
purposeofsellingthemotortyresmanufacturedin
GermanybyaGermanCompany.
2.TheGermanyCompanyheldthebulkofsharesin
DaimlerColtd&allthedirectorswereGermans
residentinGermany.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
www.seribangash.com

29. 27/42
3.DuringthefirstworldwarDiamlerCoLtdcompany
commencedanactiontorecoveratradedebt.The
houseoflordsheldthattheDaimlerColtdwasan
enemycompanyforthepurposeoftradingbecauseits
effectivecontrolwasinenemyhands.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
www.seribangash.com

30. 28/42
4.Accordinglythecompanywasdebarred
frommaintainingtheaction.Itwouldbe
againstpublicpolicytoallowalienenemiesto
trade.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler Co Ltd Vs Continental Tyre
Rubber Co Ltd.
www.seribangash.com

31. 7. Protecting Public Policy
29/42COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
www.seribangash.com

32. 30/42
1.DaimlerColtdwasincorporatedinEnglandforthe
purposeofsellingthemotortyresmanufacturedin
GermanybyaGermanCompany.
2.TheGermanyCompanyheldthebulkofsharesin
DaimlerColtd&allthedirectorswereGermans
residentinGermany.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
www.seribangash.com

33. 31/42
3.DuringthefirstworldwarDiamlerColtdcompany
commencedanactiontorecoveratradedebt.The
houseoflordsheldthattheDaimlerColtdwasan
enemycompanyforthepurposeoftradingbecauseits
effectivecontrolwasinenemyhands.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
www.seribangash.com

34. 32/42
4.Accordinglythecompanywasdebarred
frommaintainingtheaction.Itwouldbe
againstpublicpolicytoallowalienenemiesto
trade.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
Daimler Co Ltd Vs continental Tyre
Rubber Co Ltd.
www.seribangash.com

35. 1.Reduction of numbers of Members below the
Statutory Limit
33/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

36. 1.Reduction of numbers of Members below the
Statutory Limit
34/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

37. 2.Liability for the fraudulent conduct of business
35/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

38. 3.Liability for Ultra Vires Acts
36/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

39. 4.Investigation of Ownership of Company
37/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

40. 5. Mis-Description of Company’s Name
38/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

41. 6. Mis-Statement in Prospectus
39/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

42. 7. Failure to Refund Application Money
40/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

43. 7. Failure to Refund Application Money
41/42
STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
www.seribangash.com

44. 42/42
WWW.SERIBANGASH.COM
https://seribangash.com/bermuda-triangle-umkown-
mystery-of-life/
For More PowerPoints Presentations
& Blogs Please Visit…
http://seribangash.com/power-point-of-t-shirt-printing-
machine/
https://seribangash.com/barber-shop-business-
complete-guide-for-beginners/