Piercing the corporate veil (alter ego doctrine) A doctrine that says if a shareholder dominates a corp and uses it for improper purposes, a court of equity can disregard the corp entity and hold the shareholder personally liable for the corp’s debs and obligations. limited liability.
One may also ask, what is piercing the corporate veil quizlet?
Piercing the Corporate Veil. A legal theory in every state that allows creditors of the corporation to move past the corporation, and its liability shields, and go directly to the personal assets of the officers, directors, and shareholders of the corporation.
In this way, under what circumstance would a judge not pierce the corporate veil?
A domestic corporation is one chartered in any state; a foreign corporation also called an alien corporation is chartered outside the United States. Under which circumstances would a judge not pierce the corporate veil: – Sticky Fingers Sal occasionally funds for emergency expenses, including personal expenses.
What is piercing the corporate veil Why is it important?
A key reason that business owners and managers choose to form a corporation or limited liability company (LLC) is so that they won’t be held personally liable for debts should the business be unable to pay its creditors. … When this happens it’s called “piercing the corporate veil.”
What is meant by lifting the corporate veil?
Lifting of Corporate veil:
It refers to the situation where a shareholder is held liable for its corporation’s debts despite the rule of limited liability and/of separate personality. The veil doctrine is invoked when shareholders blur the distinction between the corporation and the shareholders.
Is piercing the corporate veil a separate cause of action?
Piercing the corporate veil is not a cause of action but instead a “means of imposing liability in an underlying cause of action.” … In piercing the corporate veil, the objective is to reach assets of an affiliated corporation or individual shareholders.
How do you avoid piercing the corporate veil?
5 steps for maintaining personal asset protection and avoiding piercing the corporate veil
- 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.
What are 4 circumstances that might persuade a court to pierce the corporate veil?
(1) compete with the corporation, or otherwise usurp (take personal advantage of) a corporate opportunity, (2) have an undisclosed interest that conflicts with the corporation’s interest in a particular transaction, Directors and officers must fully disclose even a potential conflict of interest.
When can the court lift the corporate veil?
Avoiding a legal obligation
The Court may lift the veil if the company concerned is ‘using’ the veil to avoid fulfilling legal obligations. For example, if a company owes a creditor money but transfers their assets to another entity to avoid payment, the Court can lift the veil.
How difficult is it to pierce the corporate veil?
It is expensive and difficult to pierce the corporate veil and get a judgment against the individual behind the company. be scheduled where we look for evidence of co-mingling. This can be easy if the debtor’s check register is available and the payees on checks are indicative of personal expenses.
