Corporate Veil

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Submitted By kostubh891
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Piercing the Corporate Veil
The whole objective of piercing the corporate veil is to prevent companies from using the guise of corporate personality to commit illegal and fraudulent and illegal acts. It can perhaps be said that the catalyst of the birth of this concept came about in Solomon v Solomon & Co. Ltd, wherein the concept of the company’s separate legal personality was upheld.
The decision came in for severe criticism from some quarters. Otto Kahn Freund called the decision ‘calamitous’ and also proposed the abolition of private companies. There have been times when Indian courts have been slightly conservative in applying the doctrine, calling for its implementation only when it is explicitly provided for in the statute. Nevertheless, this doctrine has found acceptance in a majority of Indian courts, with the Supreme Court noting that lifting the corporate veil is becoming more translucent in modern jurisprudence and that’s its frontiers are unlimited.
There are various circumstances under which courts have gone on to lift the corporate veil, such as making the holding company liable for failure to disclose the accounts of its subsidiary company, especially when it appears that the holding and subsidiary are parts of the same concern.
Other instances where courts have gone on to lift the corporate veil are where the medium of the company has been used in committing fraud and illegal conduct, determination of enemy character of the company, liability for ultra vires acts of directors as well as in the case economic offences.

[ 1 ]. [1897] AC 22. Hereinafter Solomon.
[ 2 ]. The suit was brought about by the insolvent company’s creditors in order to hold the shareholders of the company liable.
[ 3 ]. Otto Kahn Freund, Some Reflection on Company Law Reform, 7 Modern Law Review 54 (1944).
[ 4 ]. Cotton…...

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