the corporate veil can only be pierced when there is impropriety. impropriety “must be linked to use of the company structure to avoid or conceal liability” it is necessary to show both control of the company by the wrongdoer and impropriety.
Secondly, in which cases corporate veil was not lifted?
The corporate veil may be ignored if the company is formed merely to evade tax. In Income Tax Commissioner, Madras vs Sri Meenakshi Mills, Madurai, the Supreme Court held that the Income Tax authorities have a right in this case to lift the corporate veil.
Similarly one may ask, under what circumstances corporate veil is not lifted?
This legal fiction is integral to the functioning of companies and is the fundamental basis or rationale for incorporation. Such is the line, or the veil in place, between the corporate legal personality of a company and its shareholders, that it cannot be crossed or lifted except in exigent circumstances.
Can a corporate officer be held personally liable?
Typically, officers and employees of corporations or limited liability companies are not personally liable for acts taken in a corporate capacity. … Even though the officer was personally involved in the actions leading to the alleged breach, he cannot be held individually or personally liable for it.
Is it hard to pierce the corporate veil?
This legal structure creates an entity separate from the individual. … It is expensive and difficult to pierce the corporate veil and get a judgment against the individual behind the company.
Why is corporate veil lifted?
One of the most common grounds for the lifting of corporate veils, in cases wherein the shareholders of the company are indulging in fraudulent acts. In the case of Shri Ambica Mills Ltd., Re, it was held that the corporate veil of the company can be lifted in cases of criminal acts of fraud by officers of a company.
Why is corporate veil important?
The corporate veil is a legal concept which separates the actions of an organization to the actions of the shareholder. Moreover, it protects the shareholders from being liable for the company’s actions. In this case a court can also determine whether they hold shareholders responsible for a company’s actions or not.
How can we protect the corporate veil?
5 steps for maintaining personal asset protection and avoiding piercing the corporate veil
- Undertaking necessary formalities. …
- Documenting your business actions. …
- Don’t comingle business and personal assets. …
- Ensure adequate business capitalization. …
- Make your corporate or LLC status known.
Does personal guarantee pierce corporate veil?
While a one-time use of a personal credit card or a personal guarantee will not result in a court piercing the corporate veil, regularly engaging in these practices demonstrates a failure to keep personal and business assets separate.
What is reverse piercing the corporate veil?
The term “reverse piercing” the corporate veil refers to a doctrine whereby courts disregard the corporation as an entity separate from one of its 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.
Is there a difference between lifting and piercing the corporate veil?
Lifting the veil of incorporation or better still; “Piercing the corporate veil”: means that a court disregards the existence of the corporation because the owners fail to keep one or more corporate requirements and formalities. The lifting or piercing of the corporate veil is more or less a judicial act.
