Company Law
Question 1 (a) The courts usually do not look behind ‘the veil’ to inquire why the company was formed or who really controls it. However, in some situations the veil is pierced so as to render officers criminally liable for their company’s breaches of the Act. Explain clearly statutory exceptions where the court would lift the veil of incorporation.
The required characteristic of a company is that it exists as a separate legal entity from its members of the company. The separate legal entity was authoritatively established by the House of Lord (HOL) in the case of Salomon v Salomon (1897). The distinction between a company and its members as different legal person sometimes called veil of incorporation.
Sometimes, Salomon principal maybe unfair, then the courts need to review the principal and make different decision based on the various grounds. The purposes of Legislation/statute lifting the veil is usually for enforce the company law. The corporate veil can be lifted by specific provision in Legislation/statute or by discretion of the courts.
The main reasons why lift the veil of corporate:- * To expose shareholders who misuse the corporate veil to hide or avoid their own wrong doings. * To enforce the provisions of company law. * To avoid fraud. * To deal with a group of companies.
Lifting the veil of corporate by statute/Legislation:- * Section 36 Companies Act 1965
If the number of members of a company is reduced below two and the company carries on business for more than six months. The person who is the remaining member that carries on the business for those six months is aware that is the only member, then he will be personally liable for the debts of the company. The liability applies to debts incurred after the six months have expired. It is an offence for the company and the sole member to continue to operate after six months. Therefore, the sole member maybe sued after the six months.
* Section 304 Companies
The required characteristic of a company is that it exists as a separate legal entity from its members of the company. The separate legal entity was authoritatively established by the House of Lord (HOL) in the case of Salomon v Salomon (1897). The distinction between a company and its members as different legal person sometimes called veil of incorporation.
Sometimes, Salomon principal maybe unfair, then the courts need to review the principal and make different decision based on the various grounds. The purposes of Legislation/statute lifting the veil is usually for enforce the company law. The corporate veil can be lifted by specific provision in Legislation/statute or by discretion of the courts.
The main reasons why lift the veil of corporate:- * To expose shareholders who misuse the corporate veil to hide or avoid their own wrong doings. * To enforce the provisions of company law. * To avoid fraud. * To deal with a group of companies.
Lifting the veil of corporate by statute/Legislation:- * Section 36 Companies Act 1965
If the number of members of a company is reduced below two and the company carries on business for more than six months. The person who is the remaining member that carries on the business for those six months is aware that is the only member, then he will be personally liable for the debts of the company. The liability applies to debts incurred after the six months have expired. It is an offence for the company and the sole member to continue to operate after six months. Therefore, the sole member maybe sued after the six months.
* Section 304 Companies