Piercing the corporate veil (also called 'lifting the veil') is a legal remedy that allows courts to disregard the separate legal personality of a company and hold its shareholders, directors, or parent company personally liable for the company's debts or obligations. It is an exception to the Salomon principle of separate corporate personality.
Indian courts pierce the veil in cases of fraud, tax evasion, avoidance of legal obligations, and where the company is a mere façade. Key cases: State of UP v Renusagar Power Co [1988], Tata Engineering Locomotive Co v State of Bihar [1964]. Section 339 CA 2013 allows personal liability for fraudulent trading.
Following Prest v Petrodel Resources [2013] UKSC 34, UK courts clarified that piercing the veil is available only where a person under an existing legal obligation attempts to avoid it by interposing a company. The test is strict. Evasion of existing obligations (not avoidance of future liabilities) justifies piercing.
US courts pierce the veil under the 'alter ego' doctrine when: (1) there is such unity of interest and ownership that separate personalities no longer exist, and (2) adherence to the fiction would sanction fraud or promote injustice. Criteria vary by state.
Salomon v Salomon & Co [1897] AC 22 established that a company is a legal person distinct from its shareholders. Even a sole trader who incorporates has a company that is a separate entity. This is the foundational principle that piercing the veil derogates from.
Yes. Piercing the veil is a common law or equitable remedy. Companies Acts in India (Sec 339) and UK (Sec 993 CA 2006) provide specific statutory routes to director/shareholder liability for fraudulent or wrongful trading — these are distinct from veil piercing.
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