Exposition of the Concept of Lifting the Veil of Incorporation for Improved Corporate Management in Developing Countries: The Nigerian Perspective

Abstract

The business entity known as a company is a legal person, having been created by law. It can do all that a human being can do. However, as an artificial legal entity, a corporate person can only function through the natural persons who constitute the organs through which the company carries on its activities. Often times, those organs under the instrumentality of the directors or the members of the company may perpetuate fraud hiding under the cloak of the company. This paper is aimed at espousing the import of the corporate personality principle of an incorporated and the corresponding restraints associated with the management powers of its organs. The paper adopts a doctrinal approach hinged upon analytical, appraisal and expository methods. It is however found that that the directors who remain the alter ego and the directing mind and will of the company hide under the disguise of the corporate fiction to engage in self-rewarding ventures at the expense of the corporate interest and mission. This has in myriad of cases precipitated insolvency and ultimately resulted in the collapse of companies. It is therefore recommended that the statutory restraints of the powers of the corporate management should be strengthened by widening the circumstances under which the veil of incorporation should be lifted to include loss of business sustained as a result of the negligent act a director. To this end, the law should allow any member or creditor of the company to apply to the court seeking redress for and on behalf of the company. The strengthening of the corporate management would enhance productivity and boost our national economy.           

Keywords: Corporate, Personality, Management, Veil and Fraud