The document discusses the legal concept of 'lifting the corporate veil' which allows courts to disregard the separation between a company and its shareholders in cases of fraud or misconduct. Key exceptions to the corporate veil include instances of sham companies, preventing fraud, and protecting public policy. Various legal cases illustrate these principles, emphasizing that while companies are separate entities, they may be held accountable under specific circumstances.

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2. COMPANY LAW
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3. 1/42
LIFTING OF CORPORATE VEIL
Where a fraudulent & dishonesty is made of the
legal entity, the individuals concerned will not be
allowed to take shelter behind the corporate
personality. The court will break through the
corporate shell & apply the principle of what is
known as “lifting of or piercing through the
corporate veil.
 What is Lifting Corporate Veil:
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4. 2/42
LIFTING OF CORPORATE VEIL
1. A company in the eye of law is regarded as an
entity separate and distinct from its members. Any of
its members can enter into contracts with the company
in the same manner as with any other individual.
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LIFTING OF CORPORATE VEIL
2. Further a shareholder or member of a company
cannot be held liable for the acts of the company even
if he holds the entire share capital. The company’s
money and property belong to the company, and not to
the shareholder.
3. There is a veil between share holders / members
and company.
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6.  Salomon vs Salomon:
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LIFTING OF CORPORATE VEIL

7.  Salomon vs Salomon:
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LIFTING OF CORPORATE VEIL

8.  Salomon vs Salomon:
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LIFTING OF CORPORATE VEIL
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9. 7/42
LIFTING OF CORPORATE VEIL
1. The principle of differentiating the legal entity of the
company from that of its shareholders may be
referred as corporate veil.
2. If the legal entity of the corporate body is misused
for fraudulent purpose , the individuals concerned
will not be allowed to take shelter behind the
corporate entity of the company.
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10. Court may lift the corporate veil on
following grounds:
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EXCEPTION OF LIFTING OF
CORPORATE VEIL
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11. 1.Determination of Enemy Character of a
Company.
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COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
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12. 10/42
1. Daimler Co ltd was incorporated in England for the
purpose of selling the motor tyres manufactured in
Germany by a German Company.
2. The Germany Company held the bulk of shares in
Daimler Co ltd & all the directors were Germans
resident in Germany.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
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13. 11/42
3. During the first world war Diamler Co ltd company
commenced an action to recover a trade debt. The
house of lords held that the Daimler Co ltd was an
enemy company for the purpose of trading because its
effective control was in enemy hands.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
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14. 12/42
4. Accordingly the company was debarred
from maintaining the action. It would be
against public policy to allow alien enemies to
trade.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler Co Ltd Vs Continental Tyre
Rubber Co Ltd.
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15. 2.Where Company is a Sham
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COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
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16. 14/42
1. Horne entered into an agreement with his employer
company that after the termination of the employment
he would not solicit his employer’s. customer for a
certain period of time.
2. Soon after the termination of his employment he
formed a company of which the two shareholders were
his wife & one another person.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Gilford Motors Co Ltd Vs Horne (1933)
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17. 15/42
3. The company sent out circulars to customers of his
former employer injunctions was granted against
Horne & Against company he has formed restraining
them from soliciting the plaintiff’s customers.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Gilford Motors Co Ltd Vs Horne (1933)
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18. 16/42
4. The court held the company was a mere sham for
the Horne to commit a breach of his agreement against
Solicitation.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Gilford Motors Co Ltd Vs Horne (1933)
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19. 3.Prevention of Fraud & Improper Conduct
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COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
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20. 18/42
1. Lipman had contracted to sell his land to jones, but
later changed his mind.
2. To evade the contract , he formed a company &
sold his land to it.
3. The court held the seller of land & the company
were one & the same entity, &made him sell his
land to Jones.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Jones Vs Lipman
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21. 4.Where company is acting as the agent of
the shareholders
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COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
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22. 20/42
1. A British company was formed with a capital of 100
shares, out of 90 shares were held by an American
the directors of USA film Company, & 10 shares
were held by another director, a British subject.
2. The company produce a film called “Monsoon” the
production of which was financed by company.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Re F.G Films Ltd 1953
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23. 21/42
3. The court refused to agree that the film was made
by British company , the company was merely the
nominee or agent of USA film company.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Re F.G Films Ltd 1953
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24. 5. Protection of Revenue
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COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
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25. 23/42
1. D was a wealthy man getting huge dividend & interest
income. In order to avoid super tax, he formed four
private companies & transferred his investments in part
to each of the four companies in exchange of their
shares.
2. Dividends received were credited in the account of the
company & the amount was handed back to him as a
loan.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Sir Dinshaw Mancekjee Petit
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26. 24/42
3. Thus he divided his income in four parts to to avoid
tax liability.
4. The court held that as the companies did no
business, the four companies were formed purely &
simply as a means of avoiding tax.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Sir Dinshaw Mancekjee Petit
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27. 6. Avoidance of Welfare Legislation
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COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
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28. 26/42
1. Daimler Co ltd was incorporated in England for the
purpose of selling the motor tyres manufactured in
Germany by a German Company.
2. The Germany Company held the bulk of shares in
Daimler Co ltd & all the directors were Germans
resident in Germany.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
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29. 27/42
3. During the first world war Diamler Co Ltd company
commenced an action to recover a trade debt. The
house of lords held that the Daimler Co ltd was an
enemy company for the purpose of trading because its
effective control was in enemy hands.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
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30. 28/42
4. Accordingly the company was debarred
from maintaining the action. It would be
against public policy to allow alien enemies to
trade.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler Co Ltd Vs Continental Tyre
Rubber Co Ltd.
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31. 7. Protecting Public Policy
29/42
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
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32. 30/42
1. Daimler Co ltd was incorporated in England for the
purpose of selling the motor tyres manufactured in
Germany by a German Company.
2. The Germany Company held the bulk of shares in
Daimler Co ltd & all the directors were Germans
resident in Germany.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
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33. 31/42
3. During the first world war Diamler Co ltd company
commenced an action to recover a trade debt. The
house of lords held that the Daimler Co ltd was an
enemy company for the purpose of trading because its
effective control was in enemy hands.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler co Ltd Vs continental Tyre
Rubber Co Ltd.
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34. 32/42
4. Accordingly the company was debarred
from maintaining the action. It would be
against public policy to allow alien enemies to
trade.
COMMON LAW EXCEPTION OF
LIFTING OF CORPORATE VEIL
 Daimler Co Ltd Vs continental Tyre
Rubber Co Ltd.
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35. 1.Reduction of numbers of Members below the
Statutory Limit
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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36. 1.Reduction of numbers of Members below the
Statutory Limit
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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37. 2.Liability for the fraudulent conduct of business
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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38. 3.Liability for Ultra Vires Acts
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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39. 4.Investigation of Ownership of Company
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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40. 5. Mis- Description of Company’s Name
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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41. 6. Mis- Statement in Prospectus
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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42. 7. Failure to Refund Application Money
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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43. 7. Failure to Refund Application Money
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STATUTORY PROVISIONS EXCEPTION
OF LIFTING OF CORPORATE VEIL
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