Single Member Companies

By Almas Shaikh, National University of Advanced Legal Studies, Kochi “Editor’s Note: The Companies Act, 2013 has introduced provisions for a large number of instances,

Lifting The Corporate Veil

The principle of veil of incorporation is a legal concept that separates the personality of a corporation from the personalities of its shareholders and protects them from being personally liable for the company’s debts and other obligations. While a company is a separate legal entity, the fact that it can only act through human agents that compose it, cannot be neglected. Since an artificial person is not capable of doing anything illegal or fraudulent, the façade of corporate personality might have to be removed to identify the persons who are really guilty. This is known as lifting of the corporate veil. Besides the statutory provisions for lifting the corporate veil, courts also do lift the corporate veil to see the real state of affairs. However, even though the legislature and the courts have in many cases now allowed the corporate veil to be lifted, it should be noted that the principle of veil of incorporation is still the rule and the instances of lifting or piercing the veil are the exceptions to this rule.