What is Piercing the corporate veil?
In short
Piercing the corporate veil is when a court disregards a corporation's separate existence and holds its owners personally liable for its debts, usually because the corporation was used to commit fraud or was operated as the owners' alter ego.
Key takeaways
- Warning signs include commingling personal and corporate funds, ignoring corporate formalities and inadequate capitalization.
- Courts apply it rarely, mostly to closely held businesses.
- The same doctrine can apply to limited liability companies.
Where it's tested
REG: Business Law: Agency & Business Structures — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A limited partner in a limited partnership risks losing limited liability protection by: