An Elaborate Study On The Statutory Provisions And Judicial Interpretations For Lifting Of The Corporate Veil

Krishti Chakraborty & Paul T Karimpanackal, B.A. LL.B. (Hons.), Amity Law School, Amity University, Noida, Uttar Pradesh

ABSTRACT

A company, regarded as a legal entity or an artificial legal person, is a distinct and separate entity from its owners or shareholders, possessing its own set of rights, duties, and obligations in accordance with the law. It has the capacity to enter into contracts, acquire property, have a seal, to sue, or be sued etc. A company never comes to an end. The death or resignation of its members do not put an end to its existence. It survives beyond the lives of its members. This extraordinary feature of company is known as perpetual succession which simply means men may come and go but the company goes on until the process of winding up comes into the picture. The foundational idea is that the company is a separate legal entity and that there is a veil or screen between the corporation and its employees. Members of the corporation take undue advantage of the corporate veil to acquire immunity from any proceedings brought against them for any wrongdoing. They hide behind the concept of limited liability. To prohibit members from abusing the corporate veil for fraudulent actions, the court will pierce the corporate veil and identify the wrongdoer who has sought refuge behind the veil. The courts will raise the corporate veil when they ignore the firm and determine the causes that operate to break down the cooperative insulation. In this paper, we shall examine the legislative regulations and court elucidations pertaining to the same subject matter. Case laws will also be discussed to get a better understanding of the same.

Keywords: Company, Corporate Veil, Separate Legal Entity, Fraudulent Actions, Statutory Provisions, Judicial Decisions.