Along with that, courts examine different factors and conditions while decide to pierce the corporate veil. Alter ego liability and piercing the corporate veil or. The five most common ways to pierce the corporate veil and. Without question, you want to focus on running your business. This paper aims to compare and critically examine the circumstances under which veil piercing takes place against the objectives of incorporation. To learn about other ways you can become personally liable for corporate debt, see nolos article. The first is the concealment principle which lord sumption considered did not in fact involve piercing the corporate veil. This means creditors can go after the owners home, bank account, investments, and other assets to satisfy the corporate debt. This is what happened in this piercing the corporate veil new york court case.
As a general principle, corporations are recognized as legal entities separate from their shareholders, officers, and directors. Piercing the corporate veil, financial responsibility, and the limits. This is where a company or companies are interposed in a transaction so as to mask the true principals to the transaction. Piercing the corporate veil of the aforementioned separate legal entity is an openended concept and flexible, based on the specific facts concerning the relevant case. This article undertakes a comparative study of the piercing of corporate veil doctrines under u. Piercing the corporate veil in connecticut by brendan faulkner september 2009 from practical origins more than 4,000 years ago, the veil gradually became the most meaningful article of clothing. Piercing of the corporate veil for evasion of tort. In maryland, the standard for piercing the corporate veil set by the court of appeals is that shareholders generally are not held individually liable for the debts or obligations of a corporation except where it is necessary to prevent fraud or enforce a paramount equity. Keep business and personal dealings separate, or it may cost you. The countries examined are england, singapore and the united states us which are common law jurisdictions, as well as the civil law countries of china and germany. Read on to learn the rules about piercing the corporate veil. The veil creates a separate, legally recognized corporate entity and shields the people behind the corporation from personal liability. In other words, the parties attempt to employ a facade.
First, piercing the corporate veil is used as a tool of statutory interpretation in the sense that piercing the corporate veil is done in order to bring corporate actors behavior into conformity with a particular statutory scheme, such as social security or state unemployment compensations schemes. Pdf approach of the uk court in piercing corporate veil. In this article we argue that there is a rational structure to the doctrine of corporate veil piercing not only in theory, but in practice as well. It highlights some fundamental differences between the. Thompson t i introduction piercing the corporate veil is the most litigated issue in corporate law and yet it remains among the least understood. Effects of piercing the corporate veil if a court pierces a companys corporate veil, the owners, shareholders, or members of a corporation or llc can be held personally liable for corporate debts. It is generally accepted that the veil piercing doctrine. The three justifications for piercing the corporate veil. Historical, theoretical and comparative perspectives. In this article, i argue that this state of affairs results from a lack of understanding of the policy basis for limited liability. This article analyses the common law doctrine of piercing of the corporate veil in the context of tort liabilities of a company. Corporations piercing the corporate veil jrank articles. Piercing the corporate or llc veil, as the name implies, means that in some cases a creditor can ask a court to ignore the company liability shield and reach its owners.