Lifting up of Corporate Veil with Important Cases | Company Law | Daimler Co. v. Continental Tyres

Hello! In this Video, we will continue with our Discussion on Important Doctrines of Company Law.

Certificate Course on Company Law: https://learn.finology.in/courses/leg...

Through these Videos, we will cover Important Doctrines of Company Law:
1. Corporate Personality
2. Lifting up of Corporate Veil
3. Doctrine of Ultra Vires
4. Doctrine of Indoor Management
5. Doctrine of Constructive Notice

In this Video, we will Discuss 'Lifting up of Corporate Veil'
Corporate veil is a concept that separates the personality of shareholders from that of the company. It protects the shareholders from being liable for the actions of the company. There is a fictional veil that exists between the company and its shareholders, and a company acts only through its human agents.

Many a times it is seen that the company commits improper/ illegal acts behind the corporate personality of the company. Thus it became important for the court to lift this veil and see who was responsible for the improper conduct.

So through the lifting of the corporate veil, the court breaks the corporate shell which gave protection to the fraudulent directors who did things against the interest of the company.


Grounds for lifting the veil:
1. Fraud/ Improper conduct
----Important Case: Jones v. Lipman.

2. When the company is a mere cloak/shame
----Important Case Law: Gilford Motor Co. Ltd. V. Horne

3. Where a company is used for evasion of tax
----Important case law: Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd.

4. Determination of the enemy character of the company
----Important Case Law: Daimler Co. Ltd V. Continental Tyre and Rubber Co. Ltd.

The English company sued for the recovery of a trade debt during the first World War. Held, the company was an alien company since it was controlled by Germans. Payment of debt to the English Company controlled by such German company would amount to trading with the enemy. Therefore, the suit filed by the company to recover a trade debt was dismissed.

5. Public Interest- The courts have the discretion to lift the veil to protect public policy and prevent transactions which are in contravention to public policy.

Thus, where there is a conflict with public policy, the courts usually take into account the substance and ignore the form.

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