Corporate Veil And Corporate Law

3) When the case of a member or any individual in the company were abused with the intention of improper of the corporate means, the corporate veil will be lifted. Similar case was seen in Jones v Lipman (1962).

671 [2d Dept. 2010], internal citations omitted). "Additionally, the corporate veil will be pierced to achieve equity, even absent fraud, [w]hen a corporation has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the dominator 's business instead of its own and can be called the other 's alter ego '" (Id. at 671-672, internal citations omitted). "[A] party seeking to pierce the corporate veil must establish that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in the plaintiff 's injury" (Superior Transcribing Serv., LLC v Paul, 72 AD3d 675, 676 [2d Dept. 2010], internal citations omitted).

Although courts are reluctant to hold an active shareholder liable for actions that are legally the responsibility of the corporation, even if the corporation has a single shareholder, they will often do so if the corporation was markedly noncompliant, or if holding only the corporation liable would be singularly unfair to the plaintiff. The ruling is based on common law precedents. In the US, different theories, most important "alter ego" or "instrumentality rule", attempted to create a piercing standard. Generally, the plaintiff has to prove that the incorporation was merely a formality and that the corporation neglected corporate formalities and protocols, such as voting to approve major corporate actions in the context of a duly authorized corporate meeting. This is quite often the case when a corporation facing legal liability transfers its assets and business to another corporation with the same management and shareholders. It also happens with single person corporations that are managed in a haphazard manner. As such, the veil can be pierced in both civil cases and where regulatory proceedings are taken against a shell corporation.

According to the Supreme Court Justice Stevens, “We the people not we the corporation, human beings are people whereas corporations are legal fictions and that money is not speech, they believe that corporations have no consciences, no beliefs, no feelings, no thoughts and no desires.” Moreover, as stated in the fourteenth amendment, corporation is not under that section, as it is only protect for the natural persons not the artificial persons. Though corporations are not human being but they are artificial persons who still able to pay their taxes and

The Corporate personhood, a universal legal model, grants corporations genuine rights and responsibilities similar to those of individual citizens. This concept proved useful in American jurisprudence in that it simplified one’s interactions with huge conglomerates. Citing the Fourteenth Amendment of the constitution, the term corporate personhood served to consider corporations similar to individuals. In that vane, corporate entities like individuals could join contracts as a single unit, corporate entities like individuals could be named in civil lawsuits as a single group and corporate entities like individuals could make decisions that would hold the enterprise responsible as a single entity even though the decisions were

Investors are liable only for the amount of capital that they have invested, but not for any costs incurred as a result of corporation’s actions (e.g. injuries, deaths and tort claims). An ethical issue has to do with the accountability of the directors, executives and shareholders under the law. Under the law every person is liable for their wrongdoings, while the executives, directors and shareholders shift their accountability onto the invisible friends by a way of limited liability. According to Glasbeek (2002), “Legal logic–—and no other—— will permit Black to say that, in a society based on individual responsibility, he cannot be made responsible for the acts of a truly discrete, separate person, Hollinger, the corporation” (p. 11).

“Piercing the corporate viel” refers to the judicially imposed exception to this rule by which courts disregarded the separateness of the company and consider a shareholder responsible for the company’s action as if it were the shareholder’s own. A fundamental rule of corporate law is that shareholders in an organization are not liable for the obligations of the enterprise beyond the capital that they contribute in exchange for their shares.

This is not an easy burden to meet. In determining whether or not a third party has met this burden, a court will consider several factors, including: the absence of business records, undercapitalization of the business, failure to observe mandatory formalities, fraudulent representation by shareholders and/or directors, the promotion of fraud or illegal activity, payment of personal obligations by the corporation, commingling of assets, conduct that manipulated or ignored the corporate form, or is otherwise found to be an “alter ego” of the corporate mangers or shareholders. It is not necessary that the third party make a showing of the existence of all those factors in order to support a finding that the corporate veil should be pierced. Once pierced, or lifted, courts can look beyond the independent personality of a corporation and hold individual shareholders, board members, or employees liable for the obligations of the corporation. In deciding whether the burden has been met, courts will weigh two competing interests. The first being fairness, or the desire to reach an equitable outcome, and the second being societies interests in upholding the principle of limited liability.

It is a figure of speech, which cannot alter the legal aspect of the facts.” Quoted with approval by Kitto J in Hobart Bridge Company Ltd v Federal Commissioner of Taxation (1951) 82 CLR 372, 385. 5 Latham CJ, in The King v Portus; ex parte Federated Clerks Union of Australia (1949) 79 CLR 42, in the course of deciding that the employees of a company owned by the Federal Government were not employed by the Federal Government, stated (at 435) that: “The company…is a distinct person from its shareholders. The shareholders are not liable to creditors for the debts of the company. The shareholders do not own the property of the company…” Similarly, in KT & T Developments Pty Ltd v Tay (Unreported, Parker J, Supreme Court of Western Australia, 23 January 1995), Parker J remarked (at 7) that: “The selection of an incorporated entity as the vehicle for that endeavour brings with it the consequences of the vehicle. The most significant of those consequences…are that the company has a separate legal existence from its shareholders and that the ownership of shares in the company, while potentially valuable, does not give the shareholders any proprietary interest in the property of the company…” 6 See the empirical study of the frequency with which courts in the United States pierce the corporate veil: R Thompson, ‘Piercing the Corporate Veil: An Empirical Study’ (1991) 76 Cornell Law Review

Rule of Law: As provided in the corporate law, corporations are legal entities that are liable for their own liabilities, and hence shareholders cannot be personally held liable for any liability in the corporation. Whether a corporation de jure or corporation de facto, individual shareholders may not take the identity of an organization per se; and hence this limits the liabilities of individual shareholders against creditors of the

When one is operating a large corporation, things can go wrong. Many times even large business can fall into bankruptcies or have other legal suits thrown against them. Sometimes a business must also take risks that don’t always turnout in their favor. One would never want a failed business endeavor to hinder them and possibly their family. This is why, it is always nice to have a policy in place that can protect you from the liability of business debts and other obligations that can arise from operating the corporation. This protection is known throughout the business as the corporate veil. The corporate veil exists, mainly to protect the owners of a corporation from unfortunate circumstances. However, there are those who try to take advantage

A recent debate has centred on the issue of strengthening companies’ liabilities for their illegal conducts. To prevent tax evasion, banks and foreign dodgers meet ‘strict liability’ criminal penalties (Wintour 2015). Treanor (2014) reports that if banks fail, new criminal responsibilities will be held by bankers. Accordingly the Curzon and Richards (2007), corporate liability is “the extension of liability for the commission of offenses to companies”. Gooch and Williams (2015) define the corporate crime as “the acts or omissions of a company”. “Corporate criminal liability is the liability imposed upon a corporation for any criminal act done by any natural person” (US legal website [no date]). According to the Convention (1999),

American corporations and American society have been under the impression that shareholder primacy— corporate managers should be focused on the shareholder’s interest to maximize shareholder value— is the way to run a corporation, however, United States corporate law does not require directors of public corporations to maximize shareholders value; it is just one possible objective. American law protects the directors’ authority to sacrifice shareholders value in the quest of other corporate goals. Directors and executives of large corporations have the right to do “what is best for the corporation in the long run” (Stout page 46) they are free to run the corporation as they please and maximizing shareholder value is not the main concern for the corporation. Stout also argues that shareholders are neither owners, nor principals, nor residual claimants of the corporation. “Corporations are independent entities that own themselves” (Stout page 52) shareholders do not own the corporation they own shares of stock, which is a contract that provides restricted rights to the corporation. The belief that shareholders are the only residual claimants is a false statement because the corporation itself is the only residual claimant and the board of directors elects what to do with the left over residual funds. Finally, Stout argues that the lack of empirical evidence

In this document, I will give definition to criminal and civil law and explain how corporate personhood allows for lawsuits to be filed in corporate America.

The concept of a company being a separate legal entity is the most striking illustration in separating the company from its owners. A paramount principle of corporate law is that no shareholder or member of a company is made liable for the obligations incurred by such incorporations A company is different from its members in the eyes of law. In continuations to this the opposite also holds true in the sense that neither can the company be held liable for the acts of its members. It is a fundamental distinction that a company is distinct from its members.