The doctrine of 'lifting the corporate veil' in jurisprudence refers to:
- A
The procedure for registering a new company with the Registrar of Companies
- B
The judicial or statutory disregard of the separate legal personality of a company in specific circumstances, such as fraud, evasion of legal obligations, or where the corporate form is used as a mere sham or cloak to perpetrate illegality, allowing courts to look behind the corporate entity to the natural persons controlling it
- C
The dissolution of a company through voluntary winding up
- D
The process by which shareholders elect a new board of directors
View answer and explanation
Correct answer: B. The judicial or statutory disregard of the separate legal personality of a company in specific circumstances, such as fraud, evasion of legal obligations, or where the corporate form is used as a mere sham or cloak to perpetrate illegality, allowing courts to look behind the corporate entity to the natural persons controlling it
While the separate legal personality of a company is a foundational principle of corporate jurisprudence, courts and legislatures recognize that this fiction should not be allowed to shield fraud, evasion of statutory obligations, or other illegitimate purposes. The doctrine of lifting (or piercing) the corporate veil permits courts to disregard the separate personality of the company in such exceptional circumstances and look directly at the natural persons who control and benefit from the company, holding them personally accountable where the corporate form has been abused.
Source note: AK Jain, Jurisprudence; Doctrine of Lifting the Corporate Veil