Question

When can the corporate veil be lifted under the corporation act to make directors liable for corporate debts?

Answer 1

Lifting the Corporate veil disregards the limited liability and seperate legal entity rule. This is granted by the court. In this case after the veil is lifted, the company and its directors are considered as one. The veil can be lifted by any of these reasons:

* Fraud or misconduct - The court can llift the veil and hold directors personally liable for any fraud or misconduct by any of its officers or directors. If any director gets involved in these with his knowledge he can be help personally liable for consequences.

* Tax Evasion - If tax evasion practices are being followed then the persons may be held accountable for their fradulent practices.

* Company acting as an agent of directors - If company acts for directors, then those directors may be held personally liable.

* To assertain the actual ownership - If in doubts the courts may lift the veil to know the actual owners to know that it is not being run by enemies of the country.

* Misrepresentation in Prospectus - Any misrepresentation in prospectus will hold directors personally liable for it.

* Revenue Protection - To ensure revenue distribution and payment or social obligations and taxes.