Lifting of the corporate veil “ Disregarding the corporate entity and paying regard to the individual members behind the legal facade”.

Circumstances When The Corporate Veil Can Be Lifted Express statutory provisions Under judicial interpretations

Statutory Provisions When the number of members fall below the statutory minimum. Misrepresentation in prospectus. Failure to return application money. Non disclosure of representative capacity. To examine the relationship of holding and subsidiary company. To investigate into the affairs of related companies. When business is carried on to defraud the creditors.

Judicial Interpretations For determination of the character of the company For the prevention of fraud or improper conduct For the protection of revenue When company is formed to avoid welfare laws

Doctrine of ULTRA VIRES Doctrine of ultra vires is an illusory protection to share holders and pitfall to outsiders. Any act beyond the objects mentioned in the memorandum of association is ultra vires and void.

Types of ultra vires Ultra vires the company Act a)Payment of dividends out of capital b)Reducing the share capital without complying with the legal formalities. Ultra vires the Memorandum of Ultra Vires the Articles Ultra vires the directors

Effects of ultra vires An act which are ultra vires the company shall be void ab initio and cannot be ratified. A company cannot be sued on an ultra vires transaction A company cannot sue Injunction Personal liability of directors On ultra vires lending by the company On ultra vires borrowing by the company On ultra vires torts

Doctrine of constructive Notice is a cloud for the strangers A person enters into a contract which ultra vires the company, he must do so at his peril.

Doctrine of indoor management is silver lining to strangers dealing with the company. An outsider is presumed to know the constitution of a company but not what may or may not have taken place within the doors that are closed to him.