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CS Executive · Company Law and Practice · Legal Status and Types of Registered Companies

Under the Companies Act, 2013, which of the following is an example of a situation where the statute itself imposes personal liability on persons behind the company, which is an instance of lifting the veil by statute?

Fraudulent conduct of business is the statutory case. Where the business of a company is carried on with intent to defraud creditors or for a fraudulent purpose, persons knowingly party to it may be held personally liable, which pierces the veil by statute.

  1. AA company has more than one director
  2. BA company holds an annual general meeting
  3. CA company is registered with limited liability
  4. DBusiness is carried on with intent to defraud creditors, and persons knowingly party to it may be held personally liableCorrect

Explanation

The Act provides that where business is carried on with intent to defraud creditors or for a fraudulent purpose, persons knowingly party to it can be made personally liable without limit. The other options are routine features of company life and do not involve any personal liability.

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