MISUSE OF CORPORATE VEIL

Abstract

Corporate personality has been described as the most pervading of the fundamental principles of company law. 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. The issue of “lifting the corporate veil” has been considered by courts and commentators for many years and there are instances in which the courts neglected from the strict application of this doctrine, this doctrine has been established for business efficacy, necessity and as a matter of convenience.

A company is in law regarded as an entity separate from its members. In other words, it has an independent corporate existence. Any of its members can enter into contracts with it in the same manner as any other individual can and he cannot be held liable for the acts of the company even if he holds virtually the entire share capital. The company’s money and property belong the company and not to the shareholders (although the shareholders own the company)