Piercing the corporate veil is a legal theory sometimes used to impose personal liability on shareholders, officers, and directors for corporate acts. This theory permits a court to disregard the separate identity of the corporation.
The concept through which a corporation's shareholders, who are usually protected from liability for the corporation's activities, may be held responsible for certain actions.
A legal concept through which a corporation's shareholders, who generally are shielded from liability for the corporation's activities, can be held responsible for certain actions.
Judicial proces whereby a court will disregard usual immunity of corporate officers or entities from liability for wrongful corporate activities (ie. when incorporation exists for the sole purpose of perpetrating fraud). It is important to maintain all corporate formalities and regulations. The doctrine holds that the corporate structure with its attendant limited liability of stockholders may be disregarded and personal liability imposed on stockholders, officers and directors in the event of fraud or other wrongful acts done for personal gain, but in the name of the company.
The means by which the limited liability of shareholders is disregarded, permitting creditors of or claimants against the corporation to satisfy anobligation from the assets of the shareholders. In general, the shareholders must be found (a) to be operating the corporation solely for their personal benefit and not for a corporate purpose (usually indicated by a disregard of corporate formalities) and (b) to be using the protections afforded by limited liability for fraudulent purposes, criminal activity or some other improper or unjust purpose.
Legal action taken by a creditor where fraud or unjust enrichment may be involved, to hold the principals of the corporation (or other entities) liable for the debts of the corporation.
If corporate formalities are not followed, it is possible that the corporate entity will not protect shareholders from corporate debt. Keeping proper records and holding regular meetings help solve this possible problem.
a legal doctrine that lifts a shareholder's shield of immunity for wrongful corporate activity under special circumstances
A legal concept sometimes used to impose personal liability on shareholders, officers and/or directors for corporate acts. This permits a court to disregard the shareholders, officers and/or directors limited liability.
Corporate formalities such as record keeping and regular meetings must be followed or the corporate entity will not protect shareholders from corporate debt.
To disregard the corporate entity, and thus hold the shareholders liable for corporate actions.
An attempt to remove the corporate and liability shields and impose personal liability on the business owners and/or operators. Various states handle this differently, although most require evidence of some attempt to evade personal obligations, perpetrate a fraud or a crime, or to commit an injustice. The best defense is careful attention to keeping separate personal and business activities. Equally important are regular and careful corporate records, regular meetings, confirmation and ratification of corporate acts, and keeping corporate activities within the business purposes of the company.
The corporate law concept of piercing (lifting) the corporate veil describes a legal decision where a shareholder of a corporation is held personally liable for the debts of the corporation despite the general principle that those persons are immune from suits in contract or tort that otherwise would only hold the corporation liable. This doctrine is also known as "disregarding the corporate entity".
