Lifting the veil of incorporation, Business Law and Ethics

Lifting the Veil of Incorporation:

The legal rule that a registered company is at law a different person altogether from the subscribers to the memorandum of association and other persons who join the company later on as its members has been modified in instances which have come to be known in company law as"lifting the veil of incorporation". Such instances may arise under statutory provisions or case law.

 Statutory Provisions

          The following are the sections of the Kenya Companies Act which correspond to those sections of the English Companies Act 1948 which are usually listed in English Company law textbooks as the instances in which the veil of incorporation will be lifted under express statutory provisions:

Section 33: Membership fallen below statutory  minimum

This section provides that a company's member is personally liable for the company's debts incurred after the six months during which the company's membership had fallen below the statutory minimum, provided he was cognizant of the fact that the membership had so fallen. The section is regarded as an instance of "lifting the veil" because it modifies the principle established in Salomon v Salomon & Co Ltd that a member is not liable for the company's debts, and  permits the company's creditors to sue him directly in order to recover the debts.

Posted Date: 1/12/2013 2:05:20 AM | Location : United States

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