Piercing the corporate veil—the trust connection

Abstract

The principle of separate legal entity which forms the basic foundation of company law provides for the company as a separate legal entity. This results in the formation of a veil, so to say, that protects the liability of the directors or other related companies from incurring liability. Under the Doctrine of Piercing the Corporate Veil, the said veil can be disregarded in certain circumstances. Historically, this principle has been restricted to companies incorporated under statute. However, recently, a High Court of India applied the doctrine to a Charitable Trust which is a non-corporate body. With Courts of India not providing any contours or sound reasoning towards the extension of the doctrine to non-corporate bodies, this article examines the application of the doctrine on charitable trusts, the flaws and problems that arise from such application and the possible solutions for the same while tracing evolved and developing jurisprudence surrounding the doctrine in taxation cases and trusts.