piercing the corporate veil


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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.

References in periodicals archive ?
limited liability, and conversely of piercing the corporate veil, is
192) That said, there remain circumstances in which it is conceivable that the doctrine of piercing the corporate veil may be of significant utility in CFPOA enforcement.
While piercing the corporate veil was designed for the corporation, state courts have uniformly applied the same standard for the other limited liability entities (Bainbridge, 2005).
These cases, however, failed to establish clearly the doctrine of piercing the corporate veil for three reasons.
We conclude, however, that the doctrine of piercing the corporate veil, and the distinctions drawn by the courts, may make more sense than at first appears.
The purpose of piercing the corporate veil is "to decreas[e] the incentive created by limited liability to engage in overly risky activities.
Conflicting with this purpose are popular causes, such as environmental cleanup and massive class action award payments, which contradict immunity and require piercing the corporate veil.
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.
Those in favor of piercing the corporate veil are often (at least from their own point of view) justified in their efforts.
Agenda items include: - Rules of Thumb for Choosing a Business Entity - Piercing the Corporate Veil - Self-employment Taxes for LLC Members & Managers - Choosing the State of Incorporation - Tax Issues in Executive Compensation - Mergers and Conversions of LLCs, LLPs and LLLPS - Statutory and Regulatory Compliance - Ethics - Frequently Asked Questions
Indeed, piercing the corporate veil to impose personal liability for penalties for corporate tax reductions raises a plethora of questions about due process of law for employees and the companies by which they are employed.