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Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders. Usually a corporation is treated as a separate legal person, which is solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed.
The corporate veil in the United Kingdom is a metaphorical reference used in UK company law for the concept that the rights and duties of a corporation are, as a general principle, the responsibility of that company alone. Just as a natural person cannot be held legally accountable for the conduct or obligations of another person, unless they ...
Jones v Lipman [1962] 1 WLR 832 is a UK company law case concerning piercing the corporate veil.It exemplifies the principal case in which the veil will be lifted, that is, when a company is used as a "mere facade" concealing the "true facts", which essentially means it is formed to avoid a pre-existing obligation.
Whilst academic discussion highlights certain specific situations where courts are generally prepared to "pierce the corporate veil", to look directly at, and impose liability directly on the individuals behind the company; the actual practice of piercing the corporate veil is, at English law, non-existent. [13]
Piercing the corporate veil. 16. I should first of all draw attention to the limited sense in which this issue arises at all. "Piercing the corporate veil" is an expression rather indiscriminately used to describe a number of different things. Properly speaking, it means disregarding the separate personality of the company.
First, at the very least, as is recognized in public international law, [51] courts will "pierce the corporate veil" if a corporation is being used to evade obligations in a dishonest manner. Defective organization, such as a failure to duly file the articles of incorporation with a state official, is another universally acknowledged ground. [ 52 ]
The people interested in starting the enterprise - the prospective directors, employees and shareholders - may choose, firstly, an unlimited or a limited company. "Unlimited" will mean the incorporators will be liable for all losses and debts under the general principles of private law. [9] The option of a limited company leads to a second choice.
The internal affairs doctrine is a choice of law rule in corporate law.Simply stated, it provides that the "internal affairs" of a corporation (e.g. conflicts between shareholders and management figures such as the board of directors and corporate officers) will be governed by the corporate statutes and case law of the state in which the corporation is incorporated, [1] [2] [3] sometimes ...