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piercing the corporate veil

   Also found in: Legal, Acronyms, Wikipedia 0.01 sec.
piercing the corporate veil

A theory used to reach the assets of individual shareholders when there is a judgment against a corporation but the corporation has no assets to satisfy the judgment. In general, if the shareholders operated a business in complete disregard of the corporate form,meaning they never had shareholder meetings,never voted on anything,never used the corporate name on stationary or paperwork, commingled personal funds and corporate funds, and generally behaved as if the corporation did not exist, then a court will impose personal liability for corporate debts.



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19) In the past, the liability of these parent corporations or individual decision-makers was predicated on the legal theory of piercing the corporate veil.
Factors that have contributed to courts' piercing the corporate veil include: * Corporation formed and controlled for fraudulent, illegal or unjust purposes or to mislead creditors: * Absence of formalities of corporate existence; * Inadequate capitalization (insolvency); and * Personal use or commingling of corporate funds.
1 KJE2448 Piercing the corporate veil refers to those exceptional cases wherein limited liability is lifted and the separate legal personality of corporations is disregarded such that the shareholder, which may be a parent corporation, is held responsible for a company's debts or actions.
 
 
 
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