Week 4. Lifting of the corporate veil.

Since its recognition by the mid nineteenth century, the concept of corporate personality has ever been upheld throughout the various judicial decisions and strengthened by a series of Companies Acts. The logic of separate personality was fully tested in the case of Salomon v A Salomon & Co Ltd [1897] AC 22. Whereby: it was observed that after its duly constitution the company was different from Mr. Salomon. Instituting this idea of separate corporate personality for the company provided the shareholders a protection at least to their personal assets and a Perpetual Existence to company's life.
The principle of separate corporate personality is taken as a wall or curtain between a company and its members. This theory is still reckoned as cornerstone of the law of corporations and companies. However, there exist several situations when law brushes this shield aside and look at the reality of the state of things.
Disregarding and piercing the cover of independent legal entity between the company and its members and shifting the liability from the company to the responsible persons is termed as "lifting the Corporate Veil". So wherever, it is felt that the notion of legal personality is being used to commit or protect fraud, defend a crime, justify the wrong, or defeat the public intrest, law gets prepared to disregard the personality so as to prevent injustice. The approach of disregarding the corporate entity is sometimes motivated by the statute and sometimes assumed by the court on its own accord.
 

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