Lifting of Corporate Veil

TANMOY MUKHERJI INSTITUTE OF JURIDICAL SCIENCE

Dr. Tanmoy Mukherji

Advocate

Lifting of Corporate Veil-

Tanmoy Mukherji

Advocate

The Doctrine of lifting the Corporate Veil means disregarding the separate legal personality of a company & identifying the real persons (Share-holders/directors) behind it.

Normally, a company is a separate legal entity as established in Salomon Vs Salomon & Co. Ltd., but in certain situations, courts ignore this protection to prevent its misuse.

SALOMON Vs SALOMON & Co. Ltd-

Lifting of Corporate Veil-

Signs of Dummy Shareholding in Corporate Structure

Incorporation of Company-

Based on Principle in Salomon & Salomon Co. Ltd.

Judicial Reasoning-

Grounds - Mapping

The Doctrine of Lifting of Corporate Veil Acts as a necessary exception to the fundamental rule laid down in "Salomon Vs. Salomon & Co. Ltd., which establishes that a company is a several legal entities distinct from its members.

While the Corporate form provides limited liability and legal protection and courts will not allow this protection to be misused.

Therefore, when a Company is used as a device/framework for fraud, evasion of Law, Tax avoidance or improper conduct, the courts intervene and lift the veil to identify the real persons behind it.

Corporate personality is a privilege – not a licence to commit wrongdoing.