Friday, September 21, 2018

What is corporate veil? and IT LIKE CURTAINS

What is corporate veil? and IT LIKE CURTAINS
The distinct personality of a business is a legal privilege and must be used for legitimate business activities. only for purposes. In the case of fraudulent and unfair use of the legal entity, the persons concerned will not take refuge behind the personality of the company. The Tribunal will take action Company and apply the principle/doctrine of what is called "corporate veil lifting or stabbing".The court will consider the company and pretend that it is not a separate entity from the Members insisted and demanded from the members of the control persons to pay the debts to the Companies.A legal concept that separates the personality of a corporation from the personalities of its shareholders, corporate veil under incorporate,

The corporate veil lifting when a company in defense, such as tax evasion, corporate personality as a shield to cover his misdeeds.

The shareholders cannot ask for the lifting of the veil for their purposes let us know from this Example:

in which the premises of a shop have been assigned under license to the individual licensed. Premlata established a wholly owned private company and transferred the premises to that company without the consent of the government. Premlata could not remove the illegality by saying that she and her company were practically the same people.
  • Statutory Recognition of Lifting of Corporate Veil:- 
The Companies Act, 2013 itself contains some provisions [Sections 7(7), 251(1) and 339] which lift the corporate veil to reach the real forces of action.
Section 7(7) deals with punishment for incorporation of the company by furnishing false information;
Section 251(1) deals with liability for making a fraudulent application for removal of the name of the company from the register of companies
Section 339 deals with liability for fraudulent conduct of business during the course of winding up.
  • Where the corporate veil was used for committing fraud or misconduct. In a situation, the courts have lifted the veil and considered the realities of the situation.
  • Where a corporate facade is really only an agency instrumentality.
  • It was assumed that the company is considered ENEMY when a person is in fact in control his affairs in an ENEMY country or, wherever they are, they act under it Instructions from or for the enemy.
  • Where it is found that a company has abused its corporate personality for being unfair Purpose the court would not hesitate to raise the corporate veil. In addition, the corporate veil could be when the actions of a society are likely to contradict justice, comfort and the interests of society Income or worker or are against the public interest.
-: Lifting the Corporate Veil of Small Scale Industry:- 

  • Where small-scale industries were given exemptions and the company owning an industry was controlled by some group of persons, it was held that it was permissible to lift the veil of the company to see whether it was the subsidiary of another company and, therefore, so not entitled to the proposed exemptions.

  • Use of Corporate Veil for Hiding Criminal Activities
When the defendant used the corporate structure as an instrument or a facade to conceal his criminal activities (Avoidance of customs duties and excise duties to be borne by the company), the court could lift the veil treat the assets of the Company as the disposable property of the shareholder.

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