PIERCING THE VEIL Meaning and
Definition
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Piercing the veil is a legal concept used to describe a situation where the courts disregard the separation between the individual liability of shareholders or members of a corporation, and the legal entity itself. The phrase is commonly employed in corporate law to address situations where a party seeks to hold individuals personally liable for the actions or debts of a corporation.
When the veil is pierced, the court essentially treats the corporation as a mere extension of its owners, allowing for their personal assets to be exposed to potential legal claims or creditors of the corporation. This concept is usually invoked when it is believed that the corporation is being used as a shield to perpetrate fraud, to evade legal obligations, or to unjustly enrich select individuals.
In order to pierce the veil, courts typically require evidence that the corporation is not operating as a separate and distinct entity from its owners, but rather as a mere alter ego or instrumentality of its shareholders. Factors that courts may consider include inadequate capitalization, commingling of personal and corporate assets, failure to follow corporate formalities, and the existence of fraud or unfair and wrongful conduct.
Piercing the veil is a powerful legal remedy that is aimed at preventing abuse and preserving the integrity of corporate entities. It acts as a safeguard against unscrupulous individuals who attempt to misuse the corporate structure to shield themselves from liability, ensuring that justice can be properly served.
Common Misspellings for PIERCING THE VEIL
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