Veil of incorporation essay

Get Full Essay Get access to this section to get all help you need with your essay and educational issues. It has often been supposed to cast a veil on the personality of a limited company through which the courts cannot see. But that is not true. The courts can, and often do, draw aside the veil.

Veil of incorporation essay

It constitutes the bedrock principle upon which company is regarded as an entity distinct from the shareholders constituting it. When a company is incorporated it is treated as a separate legal entity distinct from its promoters, directors, members, and employees; and hence the concept of the corporate veil, separating those parties from the corporate body, has arisen.

This doctrine has been established for business efficacy, necessity and as a matter of convenience [2].

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Various grounds for piercing of the corporate veil and elements of lifting of corporate veil analyzed through the lens of leading case laws and judgements form the crux of this project report. The other subscribers to the memorandum were his wife and five children who each took up one share.

The business subsequently collapsed, and Salomon made a claim, on the basis of the debentures held, as a secured creditor. The liquidator argued that Salomon could not rank ahead of other creditors because, in fact, the company and Mr.

The House of Lords held that only the company as the separate legal owner of the property, and not the plaintiff, had the required insurable interest.

The plaintiff, being a shareholder, did not have any legal or beneficial interest in that property merely because of his shareholding. In Hobart Bridge Co. J summarizes the position in the following manner: Therefore, it can be seen that there has been, and still is, the highest authority for the separate entity concept.

However, consideration has to be given to the limitations of the separate entity principle which completely denies the efficacy of the corporate entity as a legal person separate from its founders, shareholders or management.

Judgements as early as the Salomon case have indicated the recognition of exceptions to the principle of separate entity by the courts. The courts can, and often do, pull off the mask.

Veil of incorporation essay

They look to see what really lies behind. Judicial discretion and also legislative action allows the separate entity principle to be disregarded where some injustice is intended, or would result, to a third party either internal or external to the company with whom the company is dealing.

Lifting the veil doctrine exists as a check on the principle that, in general, investor shareholders should not be held liable for the debts of their corporation beyond the value of their investment.

The corporate evil is said to be lifted when the court ignores the company and concerns itself directly with the members or the managers. It is impossible to ascertain the factors which operate to break down the corporate insulation.

One of the grounds for lifting of the corporate veil is fraud. The courts have pierced the corporate veil when it feels that fraud is or could be perpetrated behind the veil.

The courts will not allow the Solomon principal to be used as an engine of fraud.

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The two classic cases of the fraud exception are Gilford Motor Company Ltd v. Horne was an ex-employee of The Gilford motor company and his employment contract provided that he could not solicit the customers of the company. The company brought an action against him.

In this case it was clear that the main purpose of incorporating the new company was to perpetrate fraud. In the second case of Jones v. Russel J specifically referred to the judgments in Gilford v. Lipman and the company.

Under no circumstances will the court allow any form of abuse of the corporate form and when such abuse occurs the courts will step in.

Essay: The veil of incorporation - Essay UK Free Essay Database The veil of incorporation protects the director s of a company which has committed wrong from prosecution. This means that the company is liable for the wrongdoing, not the individual director s.
Veil of Incorporation Essay – Free Papers and Essays Examples Hire Writer The exception to the rule is fraud or an express statement to the contrary short of which liability of members stops, at which each signed up to at the assumption of membership. Claims are thereforelegally confined to available assets of the company.
Get help with your homework A company on incorporation is a legal entity or person distinct from its members and its property is not the property of the members. This concept was established in the following case.
Be Student: Thesis format filipino recommended service! In order to provide a thorough analysis of the situation, the doctrine and the exceptions, both statutory and judicial shall be analysed to explain how they have not undermined the doctrine, but instead merely sculpted it to fit with the practices of the modern commercial world. This essay argues however, that these exceptions do not undermine the doctrine but are necessary for its functionality and that if the doctrine had no exceptions to it then this would be a more fatal undermining of the doctrine than any of its exceptions.

The second ground for piercing of corporate veil covers group enterprises. Sometimes in the case of group of enterprises the Solomon principal may not be adhered to and the court may lift the veil in order to look at the economic realities of the group itself.

Veil of incorporation essay

In the case of D. The court of appeal thought that the present case where it was one suitable for lifting the corporate veil. Here the three subsidiary companies were treated as a part of the same economic entity or group and were entitled to compensation.

The nature of shareholding and control would be indicators whether the court would pierce the corporate veil. That the corporator has complete control of the company is not enough to constitute the company as a mere facade rather that term suggests in the context the deliberate concealment of the identity and activities of the corporator.This essay has been submitted by a law student.

This is not an example of the work written by our professional essay writers. Lifting Of The Corporate Veil ABSTRACT. From the juristic point of view, a company is a legal person distinct from its members [Salomon v.

Salomon and Co. Ltd. () A.C 22]. This principle may be referred to as the ‘Veil . Nov 20,  · The concept “Lifting the veil of incorporation” essay. By using real life examples, discuss and explain why the concept of «Lifting the Veil of Incorporation» is of imperative importance. Legal entity is separate, independent from its founders (the ability to own property, enter into commitments and act as a plaintiff, defendant in court)/5(6).

The basic presumption is that the court will lift the veil of incorporation in instances when "equity demands that justice be dispensed." management information systems towards enhancing both competitive advantage and business success were discussed in the essay.

7 Pages ( words) Case Study. Essay: The veil of incorporation The ”veil of incorporation” is a term used when a company separates legal responsibility from its directors and shareholders. This partition protects directors from being personally liable for a companies bad debts and obligations.

Besides, the veil of incorporation will be lifted when there is a group of companies, including holding and subsidiary company, the court can lift the veil and treat a .

• Incorporation of a co. casts a veil over the true controllers of the co, a veil through which the law will not usually penetrate.

• Once a co. is incorporated the courts usually do not look behind the veil to inquire why the co. was formed or who really controls it.

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