Lifting of the Veil

LIFTING THE VEIL OF INCORPORATION

It is the legal façade created when a company is incorporated. Co-operation law enforces the principle but there are some exceptions to this rule i.e. where company is looked at not as a whole but as an individual member and although the company has subsidiaries the court ignores this and looks at the financial situation of the parent company. It may be called piercing the co-operate shell.

A. STATUTORY MODICICATIONS/QUALIFICATIONS

Delvin J. in Bank Voo Hedel v Stafford [1953] 1 Q.B. 248, “the legislature can forge a sledge hammer capable of cracking open the cooperate shell.”

The circumstances under which this can happen include;

1. Reduction of the number of members below statutory minimum (Section 33)

If the members fall below the statutory minimum and the company operates like this for 6 months then the members of the company will be liable for all the debts incurred after those six months. This applies to persons still members after 6 months and aware of this fact.

2. Wrong description/non-publication of the company name (Section 109)

* Section 109(1) talk’s about publication of the name in general.

* Section 109(4) states the officer of the company authorized to sign negotiable instrument and does it on behalf of the company, whereby the company isn’t mentioned or misdescribed will be personally liable for that.

F Goldsmith Sicklesmere v Baxter

Durham Fancy v Michael Jackson (FG)

3. Group accounts before holding company (Section 150)

Section 150-153 describes this. Section 154 describes a subsidiary company. Sec 150 states the Directors’ lay group and subsidiary accounts before the Annual General Meeting e.g. state the profit, loss. A company and its subsidiaries are not one entity. Section 151 talks about the consolidated balance and profit-loss account. Section 152 states the group accounts must give a true picture of the company and its subsidiaries. Failure to lay the group account before...