The veil of incorporation in the context of group companies

The field of company law secured its importance due to the much celebrated decision of Salomon v A Salomon & Co Ltd (1897) AC 22. The decision expounded the concept of separate legal entity which became the distinctive feature from other forms of business organizations such as sole trader and partnership. Businesspersons enjoy the advantages of the concept and their limited liability. Nonetheless, the concept could be misused by businesspersons who form companies to shield from responsibility and liability. In such cases, the veil of incorporation is lifted to identify the person responsible and hold the person liable. Nevertheless, in the context of group companies, it is an intricate matter. Thus, this study investigates the approach taken by the courts in lifting the veil of incorporation in the context of group companies. The study then examines whether the litmus test fashioned by the courts in determining responsibility and liability is adequate. The study proceeds to scrutinize the provisions of the Companies Act 1965 governing this area. A comparative study is carried out to explore the legal position in England and Australia. Finally, the study concludes by proposing necessary legal measures to address the lacunae in this area.