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Is Reverse The Way Forward? Analysing The ‘Reverse’ Piercing Of The Corporate Veil




Namita Kaushik, BA LLB, Jindal Global Law School

Introduction

An incorporated company is clothed or rather ‘veiled’, with an individual personality separate and distinct from those who compose it.1 This legal fiction allows for the company to act as an individual separate from its creators, directors, officers, and shareholders and limits the liability of its members only to their financial contribution. 2 By treating the corporation as separate entity, the company is able to exist in perpetuity with its own rights and liabilities appropriate to itself.3 This veil of incorporation was upheld by the House of Lords in Salomon v. Salomon & Co. Ltd4 which recognized the separate legal personality, duly preferring form over substance.5

This cloak however is no shield and courts may disregard this presumption in order to ‘pierce the corporate veil’ to hold a shareholder personally liable for a corporation’s obligations or debt.6 While there are no specific circumstances that call for piercing of the veil, a piercing may be warranted if the separate personality is used as means to perpetrate fraud or an illegal act or where the corporation is a mere façade acting as an alter-ego or instrumentality of the owner thus resulting in inequity.7

Hozzászólások


Indian Journal of Law and Legal Research

Abbreviation: IJLLR

ISSN: 2582-8878

Website: www.ijllr.com

Accessibility: Open Access

License: Creative Commons 4.0

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​All research articles published in The Indian Journal of Law and Legal Research are fully open access. i.e. immediately freely available to read, download and share. Articles are published under the terms of a Creative Commons license which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

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The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of the IJLLR or its members. The designations employed in this publication and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the IJLLR.

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