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The Doctrine of Lifting the Veil and its Implication on Corporate Governance in Nigeria
Ituah Imhanze, LLM, ACIArbPartner
ABSTRACT
The Principle of law laid down in Salomon v. Salomon and Co Ltd1 is often considered the basis of which the jurisprudence of corporate personality has been written world over. However, the history of commercial litigation has witnessed situations where the Courts have gone beyond the corporate cloak and analyzed the workings and the motives of the members or directors of the company. In doing this, the Courts have evolved the concept of lifting, piercing or getting behind the corporate veil. The effect of this Principle is that there is a fictional veil between the company and its members. In other words, the company has a corporate personality which is distinct from its members. The famous Salomon case of more than a hundred years old, where, the United Kingdom’s House of Lords established
1 1 (1897) AC 22
the maxim that a company is a separate legal entity distinct from its members, determined the direction of modern company law and the nature of limited liability companies. The rationale behind this is that the law will not allow the corporate form to be misused or abused. In those circumstances in which the Court feels that the corporate form is being misused, it will rip through the corporate veil and expose its true character and nature disregarding the Salomon principle as laid down by the House of Lords.
Corporate governance as a concept essentially emphasizes on the attention that should be paid on how a company should be run by those saddled with the sacred and onerous responsibilities of the company’s affairs. The prominence of the board of directors in corporate governance is evident in model definitions of corporate governance which in a nutshell regards corporate governance as the processes and structures by which the business
*Ituah Imhanze, LLM, ACIArb is a Counsel in the law firm of Kenna Partners, Lagos, Nigeria. He can be reached on [email protected]
2 www.kennapartners.com
Ituah Imhanze, LLM, ACIArb*Partner
The Doctrine of Lifting the Veil and its Implication on Corporate Governance in Nigeria
This paper has been published in the Journal of Corporate Governance Vol. 5 No. 2, 2013
and affairs of an institution are directed and managed in order to improve long-term shareholder value by enhancing corporate performance and accountability, while taking into account the interest of other stakeholders.
This paper seeks to elucidate the concept of the doctrine of lifting the veil and its impact on the mechanism for monitoring the actions, policies
and decisions of corporations in Nigeria in line with international best practices. It also examines statutory, judicial and practical applications of the doctrine of lifting the veil of a company under the Nigerian Company law and its varying legal implications on corporate governance in Nigeria.
3www.kennapartners.com
Lagos8, Ogunyemi Road,Palace Way, Oniru,Victoria Island, Lagos, Nigeria
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2019
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