Shifting The Veil Of Incorporation Essay

Lifting The Veil Of Incorporation and Situation Lifting the veil of incorporation is permitted when the person of the company are using the incorporation of the company to deliberately frustrate a legal obligation. A veil was described as a wall between the company and its shareholders. Hence, once a limited liability company is created as of the separate legal entity principle, the veil of incorporation will be created between the personal assets of the members and the assets of the company.
There are three exception circumstances which the veil of incorporation will be lifted which include the corporation does not exist separately from its shareholders or its parent corporation. The parent company is responsible if the subsidiaries company are facing any legal issues or problem. Based on the case of D.H.N Food Distributors Ltd. V. Tower Hamlets London Borough Council, it stated that DHN was the parent company in a group of three companies and directly owned two subsidiaries. In the Court of Appeal, the judge, Lord Denning MR held that the subsidiaries must follow the operation of the parent company as they are practically the same as a partnership in which all the three companies are partners. As a result, the …show more content…
Winding up is the process by which a company is brought to end up the company, where the company assets are sold off and then used to pay off the company debts. After paying off all the debts, the remaining balance will be returned to the shareholders of the company. One of the wind up’s consequences is in admissibility of debt incurred after the petition. It means that the debts or claim arise after the commencement date of winding-up will be rejected by the liquidator. Next is the disposition of assets is to ensure there is no improper dispositions of assets between the time of presentation of the winding-up petition and the winding-up