Impacts of Lifting a Corporate Veil in an Organization

Qn. “There are occations when the court will look behind the formalily of legal personality and will appear to disregard it, but it is impossible to find any consistent principle upon which they will do so” Discuss.


A company is a corporation. As a corporation is a succession or collection of persons   having at law an existance , rights and duties   separate and distinct from those of the persons who are from time to time its members.

Accoring to Smith and Keenan’s Company Law 2005, corporations can either be sole ie.having one member   at a time holding perpetual office. Here, the office is personified   to distinguish   it from the person who is from time to theholder of it.

Corporation can as well be aggregate, ie;   consisting of a number   of persons   so associated   that in law theey form a registered company.

The concept of a legal personality: This is a legal decison to treat the rights or duties of a corporation as the rights or liabilties of its   share   holders or directors. Usually a corporation is treated as a separate legal person ich is solely responsible for tis debts it incurs and the sole beneficiary of the credit it is owed. Common law countries   uphold this principle of separate person hood   but in exceptional situations this may lift the corporate veil. Lifting the corporate veil can cause difficulties   and in a number of cases this is done by the law so that the human and commercial reality behind the corporate personality can be taken   account off. The veil may be lifted by th judiciary or by statute.

It is hoever rather difficult to be precise about the circumstances in which   judge   will   lift the corporate veil since power to do so is a tactic used by judiciary in   a flexible way   to counter fraud, sharp practice, oppression and illegality.Example:   In Solomon VA Solomon & Co Ltd case of 1897, the law was used to effect   the unanimous ruling ot firmly uphold the doctrine of corporate personality set out in Companies’ Act...