Page 24 - DCOM106_COMPANY_LAW

Unit 2: Meaning and Nature of a Company

6. Match List-I with List-II and select the correct answer using the codes given below in the Notes
lists:
List-I List-II
(Company Issue) (Company Document)
A. Affirmation of compliance with 1. Certificate of incorporation
the registration formalities
B. Classes of shares into which 2. Statutory declaration
shake capital is divided

C. Rules for forfeiture of shares 3. Memorandum of Association
D. Name and address of 4. Articles of association
the company auditor

5. Prospectus
A B C D
(a) 1 4 3 5
(b) 5 4 3 1

(c) 2 3 4 5
(d) 4 1 5 2

2.3 Lifting of the Corporate Veil

A company is distinct from its members. It is a separate legal entity. There is thus, a veil between
a company and its members keeping them both separate from each other. However, sometimes
it becomes necessary to lift this veil, disregard the distinct corporate entity of the company and
find out the realities of the company. The court may investigate the real affairs, ownership, etc.,
of the company. This is called lifting or piercing the corporate veil. In other words, the Court
investigates into the true state of affairs of the company. It has been observed that though a
corporation is a distinct entity, yet in reality, it is an association of persons who are in fact the
beneficial owners of all the corporate property.
The corporate veil is therefore lifted by the court, when it ignores the company and concerns
itself directly with the members or managers. It is largely in the discretion of the Courts and
will depend upon the underlying social, economic and moral factors as they operate in and
through the corporation.
The corporate veil may be lifted in the following instances:
To investigate the relationships between the holding company and subsidiary company;
To investigate the number and names of members of the company;
To investigate the true ownership of shares and controlling power over the company;

To investigate lawful objects of the company;
To investigate mismanagement and oppression by the majority;
To investigate the character of the company where it is trading with an alien enemy or
persons managing the affairs of the company are under the control of enemies or been
residing in enemy country;
To investigate into the affairs where there exists a tendency to create monopoly;

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