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.
Simply so, which of the following causes the corporate veil to be pierced quizlet?
Someone may try to pierce the corporate veil when there isn’t enough money in the corporate bank accounts to cover monetary damages potentially awarded by a court.
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 do you mean by piercing of corporate veil?
Piercing the Corporate Veil means looking beyond the company as a legal person. … In certain cases, the Courts ignore the company and concern themselves directly with the members or managers of the company. This is called piercing the corporate veil.
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.
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.
Who can pierce the corporate veil?
In general, creditors have no recourse against corporate shareholders, as long as formalities are satisfied. When, however, the corporation is fraudulently created to escape liability, then creditors may pierce the corporate veil.
What would be a reason for a court to pierce the corporate veil and hold corporate shareholders personally liable to a third party quizlet?
A court may pierce the corporate veil if certain elements are satisfied, including (1) inadequate corporate formalities (alter ego liability) (2) Inadequate Capitalization at time of formation and (3) Fraud, avoidance of obligations, or evasion of statutory provisions.
Who is in charge of a corporation?
In general, the chief executive officer (CEO) is considered the highest-ranking officer in a company, while the president is second in charge. However, in corporate governance and structure, several permutations can take shape, so the roles of both CEO and president may be different depending on the company.
