INTRODUCTION

Once a company is incorporated, in law it becomes a separate entity and

possesses a distinct legal personality from the directors or shareholders of the
company. The status of incorporation enables the company to own properties,
secure credit for business, sue and be sued.

Likewise, the status of incorporation shields the directing minds of the company
from liability in actions of the company, as such, individuals may in their ingenuity
incorporate a company, obtain credit, misapply or misappropriate same without
repaying in the belief that the company only should be held liable.

Hence the need to pierce the veil of incorporation, to identify those behind the veil
directing the mind of the company, who must be held accountable for their
indiscretion in the management of the affairs of the company.

THE CONCEPT OF INCORPORATION

Incorporation of a company refers to the legal process used in the formation, set up
or creation of a corporate entity or a company. An incorporated company is a
separate legal entity on its own, recognized by the law. These corporations can be
identified with terms like ‘Inc’ or ‘Limited’ in their names. It becomes a corporate
legal entity completely separate from its owners. The Black’s Law
Dictionary defines Incorporation as the formation of a legal corporation.

When a company is incorporated, it distinguishes it from other forms of business

organizations, as the company in law is seen as a separate legal entity different
from the directors or shareholders of the company, by virtue of which the company
has its own directing mind, can sue and be sued and can exist in perpetuity.

The dictum of Lord Denning in the English Case of Bolton {Engineering} Co.
Ltd. v T.J. Graham & Sons Ltd. {1957} 1QB 159 emphatically captures the
effect of incorporation of a company when the learned Justice stated that:

 “A company may in many ways be likened to a human body. It has a brain
and nerve centre, which controls what it does. It also has hands, which hold
the tools act in accordance with direction from the center. Some of the people
in the company are mere servant and agents who are nothing more than
hands to do the work and cannot be said to represent the mind or will”
Also, in Lasisi v. Registrar of Company {1974} 7 S.C. 73 the Supreme Court of
Nigeria held that:

“a company is an artificial human being and its registration is its birth and
certificate of registration is its birth certificate.”

Basically, a company upon incorporation is clothed with legal personality which

makes it distinct and separate from the directors or shareholders of the company.
The Locus classicus on which the jurisprudence of a corporate personality is
established is the case of Salomon v Salomon & Co. Ltd. {1897} AC 22 HL. 

In that case, Salomon transferred his business of boot making, initially run as a
sole proprietorship, to a company (Salomon Ltd.), incorporated with members
comprising of himself and his family. The price for such transfer was paid to
Salomon by way of shares, and debentures having a floating charge (security
against debt) on the assets of the company. Later, when the company’s business
failed and it went into liquidation, Salomon’s right of recovery (secured through
floating charge) against the debentures stood prior to the claims of unsecured
creditors, who would, thus, have recovered nothing from the liquidation proceeds.

To avoid such alleged unjust exclusion, the liquidator, on behalf of the unsecured
creditors, alleged that the company was sham, was essentially an agent of
Salomon, and therefore, Salomon being the principal, was personally liable for its
debt. In other words, the liquidator sought to overlook the separate personality of
Salomon Ltd., distinct from its member Salomon, so as to make Salomon
personally liable for the company’s debt as if he continued to conduct the business
as a sole trader. The Court of Appeal, declaring the company to be a myth,
reasoned that Salomon had incorporated the company contrary to the true intent of
the then Companies Act, 1862, and that the latter had conducted the business as an
agent of Salomon, who should, therefore, be responsible for the debt incurred in
the course of such agency.

EFFECTS OF INCORPORATION

By virtue of Section 42 of the Companies and Allied Matters Act, 2020 {as

amended} “CAMA 2020” the effects of incorporation or registration of a
company are summarized as follows:

1. The company becomes a body corporate by the name contained in its

Memorandum of Association with effect from the date of its registration.
 2. The company assumes a separate identity from the members who comprise
it; and;

3. The company is entitled to exercise all the powers and functions of an

incorporated company. These include the power to own property, the power
to have a common seal and perpetual succession.

BASIC REQUIREMENT BEFORE REGISTRATION OR

INCORPORATION OF A COMPANY

Before the registration or incorporation of a company, it is pertinent to consider the

following:

1. Capacity to form a Company

Every individual or promoter who intends to incorporate a company must first

satisfy whether they possess the capacity to form or incorporate a company.
Section 20 {1} of the Companies and Allied Matters Act, 2020 {as
amended} provides that an individual shall not join in the formation of a company
if he is:

1. less than 18years of age, unless there are two other persons of full age and
capacity have subscribed to the Memorandum of Association.

2. of unsound mind, who have been so found, by a court in Nigeria or

elsewhere.

3. an undischarged bankrupt; or

4. disqualified under sections 281 and 283 of the CAMA, 2020, from being a
director of a company

2. Name of Company

Another basic requirement which must be met before a company can be

incorporated or registered is that the proposed name of the company intended to be
registered must not be a name prohibited under Section 852 {1} of CAMA
2020. The section prohibits the registration of any company whose name:

1. Is identical with that by which a company in existence is already registered

or so nearly resembles that name as to be calculated to deceive, except,
where the company in existence is in the course of being dissolved and
signifies its consent in such manner as the commission requires.
 2. Contains the words “Chamber of commerce” unless it is a company limited
by guarantee; or

3. In the opinion of the commission is capable of misleading as to the nature or

extent of its activities or is undesirable, offensive or otherwise contrary to
public policy; or

4. In the opinion of the commission would violate any existing trade mark or
business name registered in Nigeria, unless the consent of the owner of the
trademark or business name has been obtained.

5. Contains any word which, in the opinion of the Commission, is likely to

mislead the public as to the nationality, race or religion of the persons by
whom the business is wholly owned or controlled;

6. Is in the opinion of the commission, deceptive or objectionable in that it

contains a reference or suggests association with any practice, institution,
personage, foreign state or government, international organization or
international brand or is otherwise unsuitable or

7. Is capable of undermining public peace and national security.

However, by Section 852 {2} of CAMA, 2020 some names are restricted save for
the consent of the commission. They are:

1. Names which include the word “Federal”, “National”, “Regional”, “State”

2. “Government” or any other word which in the opinion of the commission

suggests or is calculated to suggest that it enjoys the patronage of the
Government of the Federation, the Government of a State of Nigeria, any
Ministry or Department of the Government, or contains the word
“Municipal” or “Chartered” or in the opinion of the commission, suggests or
is calculated to suggest, connection with any municipality or other local
authority.

3. Contains the word “Co-operative” or the words “Building Society”

4. Contains the word “Group” or “Holdings”

3. Submission of Incorporation Documents

Section 36 of CAMA 2020 provides for the following documents which must be
submitted to the Commission {Corporate Affairs Commission} in an application
for the registration of a company.

a. Memorandum of Association: The memorandum of association of the

company regulates the affairs of the company as it relates to the transaction of
business or interaction of the company with the public. By Section 27 of the
CAMA, 2020the Memorandum of Association of a company shall state the
following:

1. The name of the company,

2. The registered office of the company,

3. Nature of business which the company is authorized to carry out {object

clause},

4. The restriction clause on the power of the company,

5. The nature of company,

6. The share capital of the company and

7. The amount of the minimum share capital which must not be less than
N100,000.00 in the case of a private company and N2,000,000, in the case
of a public company.

The memorandum is expected to be signed by each of the subscribers and also

stamped as a deed.

b. The Articles of Association of the Company: Section 32 of CAMA provides

that:  A company shall have articles of association prescribing regulations for the
company. The Articles of Association of the Company forms the internal
regulations for the management of the company

VEIL OF INCORPORATION

Veil of incorporation connotes the legal assumption that a corporation or company

is a distinct and separate entity or that a corporation possesses a distinct legal
personality such that the acts of a corporation are distinct from the acts of its
shareholders, directors or managers thereby exempting them from liability for
corporate actions.
Section 42 of CAMA gives statutory backing to the legality of corporate
personality of registered companies. The propriety of a company’s separate legal
personality was further recognized in the very formidable and celebrated case of
Salomon v Salomon {supra}; which reasoning has overtime been adopted by the
Courts in Nigeria. In J&J Technologies Ltd v YHQS {2015} 8 NWLR {Pt.
1460} 1 at 21 C-E, the Court was of the strong opinion that the separate
personality of a registered company remains unfettered even where a director is the
sole signatory to the account of a company. In NBCl v. Integrated Gas Nigeria
Ltd. {1999} 8 NWLR {Pt. 613} 119 at 129 the Court held that a company must be
accorded the status of recognizing the separate personality from the biological
persons that run it.    

LIFTING OR PIERCING THE VEIL OF INCORPORATION

By the general principle of law, a company has a distinct legal personality different
from the directors or shareholders of the company, such that a company can rightly
sue to enforce its rights and conversely being sued.

However, it is pertinent to state herein that though a company possess a distinct

legal personality and in fact seen as a person in law, a company nonetheless acts
through its agents who are usually the directors or principal officer and
shareholders of the company.

Thus, where the directors of a company use the company as a façade to perpetuate
illegality or obtain loan from a bank and misapplies same, the directors would not
be allowed to hide behind the veil of incorporation, rather the Court of law may lift
the corporate veil of incorporation so as to render the directing minds of the
company vicariously liable to the company’s creditors.

The case of Salomon v Salomon {supra} forms the basic ground on which the veil
of incorporation can be pierced so as to make the directors behind the veil liable
for their indiscretion in the management of the affairs of the company.

In Oyebanji v the State {2015} 14 NWLR {Pt. 1479}270 at 292B the Court

stated that

“a Court may lift the corporate veil where the corporate form is abused or
misused in a transaction. Directors will be personally liable for debts arising
from such transactions.”

Furthermore, In Nigeriate Ltd v. Dalami {Nigeria} Ltd. 1992} 7 NWLR {Pt.

252} 288, 304, the Court stated that though a duly incorporated company cannot be
disregarded even where it is a mere sham, the Court will find from the evidence
that it acted not for itself but for the persons who formed it, hence the Courts may
pierce the veil of the company’s incorporation to make accountable persons whose
benefited from the company’s action.

STATUTORY GROUNDS FOR LIFTING THE VEIL OF

INCORPORATION.

1. Reduction in the Number of Directors: Under section 118 of the CAMA,

2020, all debts incurred by a company at any time when the number of
members of the company falls below the required and continue to carry on
business for more than 6 months, the directors of such a company shall
become jointly and severally liable for the debts incurred within that period
by the company.

2. Misappropriation or misapplication of Companies Money or

property: Section 316 of CAMA 2020 makes directors personally liable for
company’s debt which arises where the company receives money or
property for a specific contract or purpose but fraudulently misappropriate or
misapplies same or wholly channel such money to other projects other than
the specific contract for which it was meant. In the case of Eboni Finance
and Securities Ltd. v Wole-Ojo Technical Services Ltd and Ors. {1996}
7 NWLR {Pt. 461} Page 464 at 478 the Court held that:
“By virtue of section 290 of the Companies and Allied Matters Act…
Every director or officer of the company shall be personally liable to the
person from whom money was received”

3. Directors’ personal liability for failure to make refunds to the

company: Under the Companies and Allied Matters Act, 2020 as amended,
the Directors of a company owe the company an obligation to discharge
their duty with skill and in good faith. Therefore, Section 293 of
CAMA provides that a director is under duty to make refunds to the
company any remuneration accorded to themselves contrary to those
provided in the articles of association by the shareholders or approved by the
Board of Directors. Section, failure of which they become personally liable
to make refunds to the company. Also, Section 309 of CAMA
2020 provides that:
“Directors are trustees of the company’s money, properties and their
powers and as such shall account for all the money over which they
exercise control, refund any money improperly paid away, and shall
 exercise their powers honestly in the interest of the company and all the
shareholders, and not in their own or sectional interests.”

4. Declaration of Shares by Substantive Shareholders of a

Company: Under Section 120 of CAMA 2020, a person who is a
substantial shareholder in a public company is required to give notice in
writing to the company stating his name and address and giving full
particulars of the shares held by him or his nominee by virtue of which he is
a substantial shareholder. Failure to comply with this requirement may
warrant the lifting of the veil of incorporation such that the shareholder may
be liable to such fines as the Corporate Affairs Commission may prescribe

5. Failure to Comply with Established Business Ethics under

CAMA: Section 729 of CAMA 2020requires that the name of the company
shall be (a) fixed outside every office where it carries on business; (b)
engrave on its common seal (c) mentioned in all Bills of Exchange, business
letters, notices, advertisements and official publications. Thus, if the
company’s name is not mentioned in the bills of exchange and other
negotiable instruments like cheques, the office or any person issuing such
instrument on behalf of the company will be personally liable for the amount
thereof. This position was affirmed by the Court in the case of Nathaniel
Abodun Adeniji v. The State. (1992) 4 NWLR p.248

6. Investigation into affairs of related entities: By Section 778 of CAMA

2020, an investigator appointed by the Corporate Affairs Commission to
investigate the affairs of a particular company is empowered by virtue of his
appointment to further investigate any entity which has in the past or in the
present associated with the company under investigation. Hence, an
investigator is empowered to look beyond the company he is investigating to
also investigate other companies such as subsidiaries or holding company
associated with the company under investigation.

7. Pre-incorporation contracts: Promoters of unincorporated companies are

personally liable to pay all debts incurred by the unincorporated company
prior to its incorporation. By the provision of Section 96{2}, Where a
director contracts on behalf of an unincorporated company, he will be
personally liable in the contract, except where the contract is ratified by the
company upon its incorporation.
CASE LAW INSTANCES WHERE THE VEIL OF INCORPORATION IS
LIFTED.

i) Where there exists a deed of personal guarantee executed by directors or

shareholders of the company for a loan obtained by it: where a director or
shareholder gives a personal guarantee with respect to a loan secured by a
company, such directors become personally liable to pay the debt of the company
if the company defaults. In Chami vs. Uba Plc {2010} 6 NWLR {Pt. 1191} Page
474 at 479 the Court held that:

“When the principal debtor fails to pay his debt, as in the instant case, the
liability of the guarantor under the guarantee crystallizes. The right of the
creditor is therefore not conditional as he is entitled to proceed against the
guarantor without or independent of the principal debtor”  

Therefore, where directors hide behind the veil of incorporation to secure loan and
misapply the benefit of the loan for other purposes, thereby defaulting in the
liquidation of the debts, the Creditors are at liberty to recover the debt from the
directors of the company who are guarantors of the facility.

By the authority of Chami vs. UBA Plc {Supra}, ratio 3; the Creditors can
maintain an action in the recovery of debt against the directors who are also
guarantors of the loan facility independently without suing the company itself.

Section 316 of CAMA 2020, also gives credence to this position that directors
who misapply company’s properties or money are personally liable for their
actions, as the Court will pierce the veil of incorporation to render such directors
accountable for their actions.
ii) Personal Liability of Directors in the Insolvency of the Company: A
company may be declared insolvent and accordingly wound up if it is deemed
incapable of paying its debt. However, by section 672 of CAMA 2020, if in the
course of winding up a company, it appears that any business of the company has
been carried out in a reckless manner with the intent to defraud creditors, on the
application of the liquidators or creditors, the Court may declare that the persons
who knowingly carried on business in such a manner are personally liable without
any limitation for any debt of the company.  furthermore, Section 673 specifically
makes directors personally liable for the company’s debt where their indiscretion
resulted in the insolvency of the Company while section 674 of the CAMA,
2020 makes both the present and past directors of the company personally liable
for the companies debt if such directors have misapplied or retained the company’s
money or property in an unjustifiable manner.

iii) Liability for Fraud: In Alade v. Alice (Nig) Ltd, (2010) 19 NWLR (Pt.1226)

at 116-117; Galadima JSCstated that one of the occasions when the veil of
incorporation of a company could be lifted by the court is when the company is
liable for fraud. It is a general principle of law that a statute will not be allowed to
be used as an excuse to justify illegality of fraud, hence, it is in the quest to avoid
the normal consequences of the statutes which may result in grave injustice that the
Court as occasion demands would look behind or pierce the corporation veil.  

Munktaka-Coomassie J.S.C in delivering his judgment stated in Alade v. Alice

(Nig) Ltd, (supra)  held that:

“it must be stated unequivocally that this court as the last court of the land,
will not allow a party to use his company as a cover to dupe, cheat or defraud
an innocent citizen who entered into lawful contract with the company, only to
be confronted with the defense of the company’s legal entity as distinct from is
directors. Most companies in this country are owned and managed by an
individual, while registering the members of his family as the shareholder.
Such companies are nothing more than one-man-business. Thence, the
tendency is there to enter into contract in such company name and later turn
around to the claim that he was not a party to the agreement since the
company is a legal entity”

Also in Olawepo v The Securities and Exchange Commission {2011} 16

NWLR {Pt. 1272} Pages 122, the Court held that:

“Where an offence has been committed by a company, every person who at

the time the offence was committed was in charge of, and was responsible to
the company for the conduct of the business of the company, as well as the
company shall be deemed guilty of the offence and shall be liable to be
proceeded against.”

iv) Undisclosed principal: A director who enters into a contract in his name
without disclosing that he is acting for a company or disclosing the company’s
name or existence, there is a risk that the director may be personally liable in the
contract. In Ataguba & Co v Gura Ltd (2005) 8 NWLR (Pt 927) 429, the
appellant who sold a truck to the respondent, collected the purchase price and
issued a receipt in his own name, was held to be the real contracting party.

v) Negligence: A director may be personally liable for the debt of a company

where his indiscretion or negligent actions in a transaction has resulted in corporate
debt. This was the position of the Court in Iyere v BFFM Ltd (2008) 18 NWLR
(Pt 1119) 300 at 351G-352E. However, a director may not be personally liable if
he merely performs his statutory responsibilities without further. To prove
negligence, it must be shown that the director owed the injured party a duty of
care, the duty was breached and damage has been suffered. In Anyah v Imo
Concorde Hotels Ltd (2002) 18 NWLR (Pt 799) 377 at 395H-396, a directors
issued a prospectus inviting subscriptions for debentures. Contrary to the directors’
misrepresentation, the aim for raising funds was to pay off liabilities. The plaintiff,
acting on a misrepresentation, advanced money. When the company became
insolvent the directors were held liable for negligent misrepresentation.

vi) Deceit: A director may be liable for deceit where the director dishonestly
makes a representation which is false and intended to be relied on and is in fact
relied on. In GE Commercial Finance Ltd v Gee (2006) 1 Lloyds Rep 337, GE
successfully claimed for damages for deceit against a company’s Chairman who
had made statements on fictitious debts to GE. GE had made payments to the
company based on the statements. In contrast to negligence, damages for deceit
extends beyond foreseeable losses. It includes gains which the injured party would
have made from the contract and the loss of opportunity to use the money in more
profitable ways but for the deceit

vii) Causing loss by unlawful means/Asset stripping: Where Directors or

shareholders of a company intentionally or fraudulently strip the company of its
assets or money in other to frustrate its creditors or judgment creditors, the Court
may lift the veil of incorporation of the company and proceed against the directors
and shareholders. The English case of  Marex Financial Ltd v Carlos Sevilleja
Garcia [2017] EWHC 918 indicates that English courts may hold a director
personally liable where he strips a debtor-company of assets to frustrate a
judgement creditor. Marex got judgment against the debtor-companies. The debtor-
companies’ shadow director stripped them of assets transferring $9.5m to himself.
Marex sued the shadow director for procuring the violation of Marex’s rights under
the judgment and for causing loss by unlawful means. The court ruled that Marex
had a good arguable case.

LIFTING THE VEIL OF INCORPORATION.

Lord Denning in Littlewoods Mail Order Stores Ltd  V  IRC noted that

“the doctrine in Salomon  V   Salomon has to be watched very carefully”…
“courts can often draw aside the veil… to see what really lies behind”.

Lifting the veil occurs where the courts or law disregard the corporate
personality of the company in deserving circumstances. In Adeyemi  V  Lan
and Baker (Nig) Ltd, the court held that there is nothing sacrosanct about
the veil of incorporation. The veil shall be lifted to prevent the avoidance
of recognition by the eyes of equity.

In Lennards Carrying Co  V  Asiatic Petroleum, the court noted that a

corporation is an abstraction. In Trenco (Nigeria) Ltd  V  African Real
Estate, the court noted that since the company has no mind of its own, it
acts through agents. Lord Denning noted in Bolton Engineering
Co  V  Graham and Sons ltd a co can be likened to a human body which has
a brain and nerve centre. The brain controls and the hands act. He then
stated that; the directors and managers represent the directing mind and
their action can be treated as that of the company. See also-Faith
Entreprises Ltd  V  BASF Nigeria Ltd.

We shall discuss the judicial instances and of lifting the veil, then proceed
to the Statutory provisions on lifting the veil.

JUDICIAL LIFTING THE VEIL

Professor Abugu rightly notes; that “there is no consistent principle”. The

veil would be lifted where the justice of the case demands. Examples
include.

:: To prevent fraud and improper conduct : Public Finance Securities

Ltd  V  Jefia. In Gilford Motor co Ltd  V  Horne, the defendant had
promised not to solicit after the company’s customers if his appointment
(with the company) was terminated. He later formed a company to do the
soliciting/seeking. Held: the co was a mere device. In Jones  V  Lipman,
Lipman contracted to sell his land to Jones. He later sought to evade the
contract by incorporating a company and conveying the piece of land to the
company and said he did not own the land again. Held: company is a mere
creature of Mr Lipman. In Wallersteiner  V  Moir lord Denning frowned
upon the use of companies as puppets by the defendant Dr Wallersteiner.
In Akinwunmi O. Alade  V  Alic (Nig) Ltd, court noted that veil must be
lifted where there is fraudulent and reckless conduct.
In Adedipe  V  Frameinendur[1]  the court held that where a company fails
to apply money received for purpose received, the directors would be
personally liable in accordance with Section 290 CAMA.

:: To know the identity of those in control of the company : In Diamler Co

Ltd  V  Continental Tyre and Rubber Co (GB) Ltd[2]  in determining
whether the respondent company was an alien, the court had to look at the
nationality of persons in control of the company. In Re F.G Films Ltd, an
English company claimed certain tax advantages by virtue of being a
British film company. The veil was lifted to discover that the company
(though registered in England) was controlled by an American Holding
Company. Held they are not essentially English and could not claim the tax
advantages.

:: Revenue Purposes : “govament too like moni” therefore, they would do

anything necessary to enforce revenue collection and prevent tax evasion.
Even if it means lifting the veil of the company. In De Beers Consolidated
Mines  V  Howe, a spotlight was shone on those who have managerial
control to decipher the residence of the company for tax purposes. See  Re
FG Films discussed above. Firestone Tyre and Rubber Co  V  Llewellin,
an English subsidiary was treated as an agent of its American Parent
company for the purposes of tax. Also Pan Asian African Co
Ltd  V  National Insurance Corp (Nig) Ltd. Conversely, in Marina
Nominees Ltd  V  Federal Board of Inland Revenue, it was noted that if
lifting the veil would result in loss of revenue to the government, then the
veil would not be lifted.

:: In cases of Agency : we know that an agent is a person who acts on

behalf of another person (his principal) and can bind his principal with
third parties. Where a company is acting on behalf of another person (a
principal), the court can disregard the issue of separate personality and
decide to fish out the principal.
:: Where a company has various subsidiaries, the court may (in deserving
circumstances) regard all the subsidiaries and the company as a single
economic unit –DHN Food Distributors Ltd  V  Tower Hamlets LBC. In this
case, a land was registered in the name of a subsidiary but a parent
company carried on business there. When the government compulsorily
acquired the land and sought to compensate only the subsidiary, the court
(Per) Lord Denning refused and noted that the group should be treated as
one concern and the parent should also be compensated. This single
economic theory was affirmed in Amalgamated Investment and Property
Co Ltd  V  Texas Commercial International Bank Ltd[3]  but was criticised
in Woolfson  V  Strathclyde Regional Council. In a leading case
of Adams  V  Cape Industries Plc[4]  the courts refused to apply the single
economic unit principle and noted that subsidiaries are not facades. This
shows that it all depends on the facts of each case.

:: Other instances where it would be unjust and inequitable not to lift the
veil. See Intercontinental Offshore Construction Ltd and
Ors  V  Shoreline Liftboats Nigeria Ltd: Also;  Gilford Motor
Co  V  Horne.

STATUTORY LIFTING OF CORPORATION VEIL.

Various statutory provisions may direct the court to lift the veil of
incorporation in certain circumstances. They include:

 Section93_CAMA:If  a  company  carries  on  business  without  having 

at  least  two  membersand  does  so  for  more  than  6  months,  every 
director  or  officer[5]  of  the  company  during  the  time  that  it  so  car
ries  on  business  with  only  one  or  no  member  shall 
be  liable  jointly  and  severlly  with  the  company  for  the  debts  of  the 
company  contracted  during  that  period.

 Section_336(1)_CAMAIf,  at  the  end  of  a  year  a  company  has  subs

idiaries,  the  directors  shall,  as  well  as  preparing  individual  accoun
ts 
for  that  year,  also  prepare  group  financial  statements  being  accou
nts  or  statements  which  deal  with  the  state  of 
affairs  and  profit  or  loss  of  the  company  and  the  subsidiaries. This
provision sees the company as a single economic unit for the purpose
of preparing financial statements.
  Section_506 (1)CAMA:  If,  in  the  course  of  the  winding  up  of  a  co
mpany,  it  appears  that  any  business  of  the  company  has  been  carri
ed 
on  in  a  reckless  manner  or  with  intent  to  defraud  (creditors  of  the 
company  or  creditors  of  any  other  person  for  any 
fraudulent  purpose),
the  court,  on  the  application  of  the  official  receiver,  or  the  liquidat
or  or  any  creditor  or 
contributory  of  the  company,  may,  if  it  thinks  proper  so  to  do,  decl
are  that  any  persons  who  were  knowingly 
parties  to  the  carrying  on  of  the  business  in  manner  aforesaid  shal
l  be  personally  responsible,  without  any 
limitation  of  liability  for  all  or  any  of  the  debts  or  other  liabilities 
of  the  company  as  the  court  may  direct.

 Section 548(4)[6] . Requires an officer that stamps or signs on behalf

of a company to clearly write the company’s name in the (signed or
stamped) document else he would be personally liable. Unless the
company decides to pay.

[1]  (2012) 24 WRN 120 CA.

[2]  [1916] 2 A.C 307.

[3]  [1982] Q.B 84.

[4]  [1990] Ch 433. Adams v Cape industries, Cape Industries plc was a UK
company, head of a group. Its subsidiaries mined asbestos in South Africa.
They shipped it to Texas, where a marketing subsidiary, NAAC, supplied
the asbestos to another company in Texas. The employees of that Texas
company, NAAC, became ill, with asbestosis. They sued Cape and its
subsidiaries in a Texas court. Cape was joined and argued there was no
jurisdiction to hear the case. Judgment was still entered against Cape for
breach of a duty of care in negligence to the employees. The tort victims
tried to enforce the judgment in the UK courts. The requirement, under
conflict of laws rules, was either that Cape had consented to be subject to
Texas jurisdiction (which was clearly not the case) or that it was present in
the US. The question was whether, through the Texas subsidiary, NAAC,
Cape Industries plc was ‘present’ in the US. For that purpose, the
claimants had to show in the UK courts that the veil of incorporation could
be lifted and the two companies be treated as one. Held that the parent,
Cape Industries plc, could not be held to be present in the United States
and the U.S judgment awarded against it should not be recognised.

[5]  Section 31 of the repealed 1968 Act used “every person who is a

member”.

[6]  If  any  officer  of  a  company  or  any  person  on  its  behalf‐   

(a)  uses  or  authorises  the  use  of  any  seal  purporting  to  be  a  seal  of  the 
company  whereon  its  name  is  not  so  engraved  as  aforesaid;  or   

(b)  issues  or  authorises  the  issue  of  any  business  letter  of  the  company  o
r  any  notice,  or  other  official  publication 
of  the  company,  or  signs  or  authorises  to  be  signed  on  behalf  of  the  com
pany  any  bill  of  exchange,  promissory 
note,  endorsement,  cheque  or  order  for  money  or  goods  wherein  its  nam
e  is  not  mentioned  in  the  manner  aforesaid;  or   

(c)  issues  or  authorises  to  be  issued  any  bill  or  parcel,  invoice,  receipt, 
or  letter  of  credit  of  the  company,  wherein 
its  name  is  not  mentioned  in  manner  aforesaid,  he  shall  be  guilty  of  an 
offence  and  on  conviction  liable  to  a  fine  of 
N500  and  shall  further  be  personally  liable  to  the  holder  of  any  such  bil
l  of  exchange,  promissory  note,  cheque,  or 
order  for  money  or  goods,  for  the  amount  thereof,  unless  it  is  duly  paid 
by  the  company.

CONCLUSION

The veil of incorporation of company provides a formidable ground for businesses

and enterprises to thrive being that it protects business owners and investors from
direct corporate assault and avoidable litigation that would have arisen against the
directors of the company as a result of the actions of the company.

However, the law will not permit directors to hide under the veil of incorporation
or use the veil of incorporation as a façade to defraud the company or its creditors.
Hence the Court will readily pierce or lift the veil of incorporation to bring to
account the directors of the company acting behind the veil so as to ensure
creditors recover their money directly from such directors.

 
References:
 (1986) 1 SCC 264
 1897 AC 22
 [2012] EWCA Civ 808
 Vodafone International Holdings B.V. v. Union of India & Anr. [S.L.P.
(C) No. 26529 of 2010, dated 20 January 2012]

 Ottolenghi, S. ‘From peeping behind the corporate veil to ignoring it

completely’, [1990]
 MLR 338.
 ¢ Gallagher, L. and P. Zeigler ‘Lifting the corporate veil in the pursuit of
justice’, [1990] JBL
 292.
 ¢ Lowry, J.P. ‘Lifting the corporate veil’, [1993] JBL 41, January, pp.41–42.
 ¢ Rixon, F.G. ’Lifting the veil between holding and subsidiary companies’,
[1986] 102 LQR
 415.
 ¢ Muchlinski, P.T. ‘Holding multinationals to account: recent developments
in English
 litigation and the Company Law Review’, [2002] Co Law, p.168.
 ¢ Lowry, J.P. and Edmunds ‘Holding the tension between Salomon and the
personal
 liability of directors’, [1998] Can Bar Rev 467.