Question

QUESTION FOUR
“The doctrine laid down in Salomon has to be watched carefully. It has been supposed to cast a veil over the personality of a limited liability company through which the courts cannot see. But this is not true. The courts can and often do draw aside the veil. They can and often do pull off the mask. They look to see what really lies behind”. Discuss

Answer 1

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Answer:-

According to the Salomon standard an organization has its very own legitimate character and this is discrete from its investors. At the end of the day an organization is dealt with and viewed as a different lawful substance that has its own novel character and that is isolated from its investors, its chiefs and its workers. Therefore the rights and obligations of an organization are isolated from the rights and obligations of its investors and chiefs.

Anyway the corporate cloak can be lifted by courts if significant bad form is made by its essence.

Courts should once in a while lift the corporate shroud to decide the genuine idea of an exchange and this is finished by the courts by looking behind the corporate façade.

At the point when the requirement for the courts is to forestall extortion then they may even puncture the corporate cover instead of lifting it. Penetrating the corporate shroud involves expelling the security delighted in by organizations under the Salomon guideline. For example chiefs of an organization may by taking part in trick exchanges behind the façade of an organization and the court will puncture the corporate shroud to reveal and afterward shut down the progressing hoax exchanges.