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KembaraXtra – Legal Terms – Lifting the Veil
Lifting the veil refers to the legal act of disregarding the separate legal personality of a company. Normally, a company is treated as distinct from its shareholders and directors, but in exceptional circumstances, courts may look beyond this separation.
This step may be permitted by statute, particularly in cases involving wrongful or fraudulent trading, where individuals behind the company may be held personally liable. Courts may also intervene where a company structure is used to commit fraud or avoid legal obligations.
However, such intervention is rare and carefully limited. Courts are reluctant to undermine the principle of limited liability and will only pierce the corporate veil where justice clearly requires it, often preferring alternative legal reasoning such as agency or trust relationships.
Lifting the veil refers to the legal act of disregarding the separate legal personality of a company. Normally, a company is treated as distinct from its shareholders and directors, but in exceptional circumstances, courts may look beyond this separation.
This step may be permitted by statute, particularly in cases involving wrongful or fraudulent trading, where individuals behind the company may be held personally liable. Courts may also intervene where a company structure is used to commit fraud or avoid legal obligations.
However, such intervention is rare and carefully limited. Courts are reluctant to undermine the principle of limited liability and will only pierce the corporate veil where justice clearly requires it, often preferring alternative legal reasoning such as agency or trust relationships.
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