“Piercing the corporate veil” refers to a situation in which courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts.
Also to know is, what is the piercing the veil of corporate fiction doctrine?
In corporate law, there is the doctrine of piercing the veil of corporate fiction which says that, in certain circumstances, the legal personality of the corporation can be set aside to enable creditors to run after the individual stockholders.
- Undertaking necessary formalities. …
- Documenting your business actions. …
- Don’t comingle business and personal assets. …
- Ensure adequate business capitalization. …
- Make your corporate or LLC status known.
Correspondingly, why should someone worry about piercing the corporate veil?
Corporations are separate legal entities so the owners or shareholders will not be held liable for any of the debts that the business incurs. If you pierce the corporate veil, this protection will be invalid and you’ll be legally responsible for the debts of your business.
What are the exceptions to the doctrine of corporate fiction?
The exception to this rule is when the separate personality of the corporation is used to “defeat public convenience, justify wrong, protect fraud or defend crime.
When corporate officers are personally liable jurisprudence?
Personal liability of corporate directors, trustees or officers attaches only when (1) they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its …
