RETHINKING THE DOCTRINE OF LIFTING THE VEIL OF INCORPORATION IN NIGERIA: MAKING A CASE FOR A STREAMLINED JUDICIAL APPROACH

Abstract

Once a company is incorporated, it enjoys a legal personality that is distinct from that of its members. This invariably implies that those running the affairs of the company do not incur personal liability while doing so. The cloak of corporate personality bestowed on companies upon incorporation is one of the antecedents of registration. The doctrine of lifting the veil is an exception to the general rule of corporate personality. It is a creation of the English courts and came to fore in the old case of Salomon v. Salomon & Co. Ltd where the House of lords held the corporate legal personality of a company to be sacrosanct and the corporate veil not easily pierced. Prior to the case of Adams v. Cape Industries Plc, the English courts will readily lift the veil of incorporation at the slightest prompt. However, from Adams v. Cape Industries Plc, the English courts started devising well thought out rules that allow for the lifting of the corporate veil. In the case of Prest v. Petrodel Resources Ltd it became settled that the veil of incorporation will not be lifted for flimsy reasons, even if it is in the interest of justice, but for impropriety and evasion of legal obligation. The principle of corporate legal personality is well entrenched in the Nigerian legal system as same is provided for in section 42 of the Companies and Allied Matters Act 2020. Also, the doctrine of lifting the veil is well recognised in Nigeria as the courts will lift the veil in instances stated by the Legislature. However, the Nigerian courts’ approach in lifting the veil is not streamlined, unlike its English counterparts. This paper examines the doctrine of lifting the veil by the English and Nigerian courts. It traces the movement in the English courts to the present position and reveals the inconsistencies of the Nigerian courts in exercising the equitable power of the court to lift the veil by considering few cases particularly the case of Mariner Nominee Ltd v. Federal Board of Inland Revenue and Mezu v. Cooperative & Commerce Bank (Nig.) Ltd. This paper argues that the Nigerian courts, in most cases, fail to avert their minds to the trend in the English courts and the position in the locus classicus case of Salomon v. Salomon & Co. Ltd, and suggests that the clear rule in Prest v. Petrodel Resources Ltd or better still the earlier position by the Nigerian court in Mariner Nominee Ltd v. Federal Board of Inland Revenue be adopted in lifting the veil of incorporation in Nigeria.