Lifting the corporate veil

Slides:

Advertisements

Similar presentations

Legal Document Preparation Class 9Slide 1 Basic Debtor-Creditor Terminology Debtor: person who owes the money Creditor: person to whom the money is owed.

Advertisements

Prospectus According to Section 2(36) of the Companies Act, “ prospectus means any document described or issued as a prospectus and includes any notice,

MAINE BUSINESS ENTITIES Liability of Individuals and Successors Michael Miller, AAG May 21, 2009.

Rupert D’Cruz (Barrister, Littleton Chambers) 12 April Ekaterinburg SHAREHOLDERS’ RIGHTS - OBTAINING RELIEF FROM THE.

Chapter 38 Corporations: Formation and Financing McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Forms of Business.

Winding up.  Winding up (which is more commonly called liquidation ) is proceeding for the realization of the assets, the payment of creditors, and the.

Ch 7: Type of Business Ownership

PROSPECTUS AND COMMENCEMENT OF BUSINESS

Corporations Chapter 34.

Shrine Treasurers Association

1 © 1999 by Robert F. Halsey Stockholders’ Equity In this section we will review: ¶ The nature of Stockholders’ Equity – The characteristics of the corporate.

LIMITED LIABILITY PARTNERSHIPS A Review of Legal Issues By John E. Rogers, of Burns, Fitzpatrick, Rogers & Schwartz 0.

1 Forms of business organization 2 Sole trader 3 Partnership 4 Non profit-making organization 5 Classification of company 6 Significance of separate corporate.

1 Chapter 19 Business failure Copyright © Nelson Australia Pty Ltd 2003.

Corporation A legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual.

Stock Market Game.

Corporate Law. State owned company All provisions of Act that apply to public companies also apply to State owned company Ends with SOC Minister may make.

 Business is owned and run by one individual  Nearly 76% of all businesses  Owner receives all of its profits and bear all of its losses.

P A R T P A R T Corporations History & Nature of Corporations Organizational and Financial Structure of Corporations Management of Corporations 10 McGraw-Hill/Irwin.

Forms of Business Organization in the USA

Choosing a legal structure. What this topic is all about There are several choices of business structure for a start-up Setting up a new business is a.

Company Law. Contents FEATURES TYPES FORMATION COMMENCEMENT DOCTRINES DIRECTORS METHODS OF RAISING CAPITAL MEETINGS WINDING UP.

Business Entities Dr. John Abraham Professor University of Texas Pan American.

Business Entities under the General Corporation Law of Delaware 1 Civil Service Bureau Reform & Development Department

Agency AUTHORITY OF AGENTS (1) Where an agent acts in the name of a principal, the rules on direct representation apply. (2) Where an intermediary acts.

Hong Kong company Law Group 5 Choi Ka Hei s Lam kai Lung S

FOUNDATIONS OF ENTREPRENEURSHIP Elikem Nutifafa Kuenyehia CLASS FIVE: LEGAL,REGULATORY AND POLICY CONSIDERATIONS.

Corporations.  90% of all businesses in the U.S. are set up as Corporations  Corporation is a body formed & authorized by law to act as a single person,

© 2015 albert-learning.com Company Law. © 2015 albert-learning.com Company Law Corporate law : (also "company" or "corporations" law) Is the study of.

Corporate Personality, Lifting the Veil and a Company’s Constitution

1 Winding up by the court. 2 Introduction Introduction Winding-up or liquidation Winding-up or liquidation Ending the life of a company Ending the life.

1 Chapter 14 The modern corporation Copyright © Nelson Australia Pty Ltd 2003.

Economics Basics BUSINESS ORGANISATION. A firm is a unit of management. An organization which trades under a particular name, and which controls the way.

Basic Business Organizations Class 5. Starting a Business  The first question: –What form should the business take? Sole proprietorship Partnership Corporation.

Introduction to company ,types

Copyright © 2004 by Nelson, a division of Thomson Canada Limited CANADIAN BUSINESS AND THE LAW Second Edition by Dorothy Duplessis Steven Enman Shannon.

Finance and the Financial Manager. “Any legal economic activity to earn profit is called business.” Kinds of Business:  Manufacturing Business  Services.

FORMS OF BUSINESS ORGANISATION (continued)…... 1.The Corporation (or Company): A company is made when 2 or more people join together as promoters (owners)

Legal Aspects of Business Organisations The Company.

MODULE 2 INTRODUCTION TO DIRECTORS’ DUTIES ADB Private Sector Development Initiative Corporate and Financial Governance Training Solomon Islands Dr Ann.

Corporations Section Understanding Business and Personal Law Corporations Section 28.1 Forming and Financing a Corporation What You’ll Learn How.

INTRODUCTION OF FINANCIAL REPORTING Dr. BALAMURUGAN MUTHURAMAN Chapter –

 There are four forms of business organization, they are: ◦ Sole Proprietorship ◦ Partnership ◦ Corporation ◦ (Cooperative-not covered)  We will look.

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 15 Corporations.

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

International Fiscal Association Regional Conference Seoul, South Korea May 12, 2016 Shefali Goradia BMR Advisors India.

Company Law II. Shares All companies require funds to operate. Companies raise funds through shares and debentures. “Shares” means the interests of members.

Company Law. For today looking at the following: Formation or Incorporation of companies Pre incorporation Contracts.

Corporate forms in Ghana. Corporate environment is made up of registered companies, statutory corporations, sole proprietorships, incorporated private.

Company Law Introduction A company, in common parlance, means a group of persons associated together for the attainment of a common end, social or economic.

Entrepreneurship CHAPTER 7 SECTION 2.  Corporation – business that is registered by a state and operates apart from its owners. 1.Ownership or equity.

The Legal Function – Starting a New Business: Getting the Legal Structure Right Enterprise and its Business Environment © Goodfellow Publishers 2016.

Anglo-American Business Law Chapter 4 The company form

Incorporation &Related Matters. Companies The law applicable for companies is Companies Act No.7 of 2007 Other rules and regulations oSecurities Council.

Chapter 7 Legal Consequences of Incorporation

CHAPTER ONE DEFINITION AND NATURE OF COMPANY

Customized by Professor Ludlum October 31, 2016

Limited Liability.

Corporations: Formation and Financing

Copyright John Wiley & Sons Canada, Ltd.

THE MULTINATIONAL ENTERPRISE

Business Organizations Lectures

Corporations and the Sarbanes-Oxley Act

Business Law Outcome 3.

Slide Set Eight Corporations II Shareholder Rights

Section 2(20) of the companies Act2013 provides that “Company means a company incorporated under this Act or under any previous company Law.”

Introduction to company law

Presentation transcript:

Lifting the corporate veil The concept of the ‘corporate veil’ is inherent in the doctrine of corporate personality. The effect of this principle is that there is a fictitious veil (and not a wall) between the company and its members. This flows from the acceptance of limited liability

Lifting the corporate veil However there had been a fraudulent use of the veil of corporate personality by members and directors. Due to this the courts may break through or lift the corporate veil or crack the shell of corporate personality. i.e. the company and the owners are treated as the same Clearly this is most significant where the company is insolvent and creditors wish to pursue the assets of the owners

Lifting the corporate veil Cases where the court may lift the corporate veil Given the significance of limited liability it is crucial to understand the circumstances which could possibly lead to avoidance of the ‘veil’ Protection of revenue The courts may ignore the corporate entity of a company where it is used for tax evasion. Tax planning is legitimate provided it is within the framework of law.

Lifting the corporate veil Case: Sir Dinshaw vs Maneckjee Petit D, an assessee , who was receiving huge dividends and interest incomes, transferred his investments to 4 private companies formed for the purpose of reducing his tax liability. These companies transferred the income to D as a pretended loan.

Lifting the corporate veil 2. Prevention of fraud or improper conduct The legal personality of a company may be disregarded if it has been used for some fraudulent purposes like defrauding creditors or defeating or circumventing law

Lifting of the Corporate Veil Case: 1 Gilford Motor Co. Vs Horne Horne, a former employee of GM company, had bound himself not to solicit to its customers. He formed a Company to do his business and sent the employees of the so formed company to solicit the customers of GM & Co.

Lifting the Corporate Veil Decision The Court described the company as device stratagem and mere cloak or sham and issued injunction restraining Horne and his Company as well from dealing with the customers of GM Company.

Lifting the corporate veil 3. Determination of character of a company in case of war During the war the court may lift the veil to enquire whether the company it is controlled by alien enemies. Company avoiding legal obligations The court may disregard the legal personality of the company if the use of the company is being made to avoid legal obligations

Lifting the Corporate Veil Case 4: Diamler Co.Ltd vs Continental Tyre and Rubber Company Limited A company was incorporated in England for the purpose of selling tyres manufactured in Germany by a German Company. The German Co. held the bulk of the shares in the English Co. The holders of the remaining shares (except 1) and all the directors were Germans, resident in Germany. Thus the real control was in the hands of the Germans. After the war broke out between Germany and England, the English Co. filled a suit for recovery of money for its trade debts

Lifting the Corporate Veil Decision The House of Lords laid down that the Company incorporated in UK is a legal entity, a creation of law with status and capacity which the law confers. It is not a natural person with mind and conscience. It can be neither friend nor enemy. But it can assume an enemy character when persons in de facto control are residents in an enemy country. Accordingly the company was not allowed to proceed with the action . If the action would have been allowed the company would have been used as a machinery by which the purpose of giving money to the enemy would be accomplished

Lifting the corporate veil Company acting as agent or trustee of the shareholders In this situation the shareholders will be responsible for the acts of the company 6. Protecting Public policy The courts may lift the corporate veil to prevent transactions contrary to public policy

Lifting the corporate veil Reduction of membership Where the number of members of the company is less than the statutory minimum, and the company carries on business for more than 6 months thereafter, every member who is aware of the fact shall be severally liable for the payment of the Company’s debt contracted during that time. 8. Misrepresentation in prospectus Every company who proposes to raise funds through issue of equity shares must issue a prospectus or a Statement in lieu of prospectus. In case there is misrepresentation, every director, every promoter and every other person who authorises such issue is liable towards those who subscribe for shares on faith of untrue statements.

Lifting the corporate veil 9. Misdescription of name When the Company’s name is not mentioned or not mentioned properly in any document, then any person signing such a document shall be personally liable.