Corporate Veil And Corporate Law

2055 Words Jan 4th, 2016 9 Pages
As a general rule of thumb, shareholders of US corporations are not personally liable for the debts, taxes, obligations or actions of the corporation in which they are a member. This shield from personally liability is known as the corporate veil. The corporate veil, a cornerstone of American corporate law, derives from the fact that corporations in America are regarded as legal personalities, distinct and separate from their shareholders; a concept that gives a little context to the now infamous “Corporations are people!” “blunder” by former presidential candidate Mitt Romney during the 2012 election cycle. The corporate veil also protects parent companies from the debts, taxes, and obligations of subsidiaries. This protection is hailed by many scholars in the area of corporate law because it is believed to be an encouraging factor in the formation new business, which helps to develop and maintain a healthy economy. While it is true and widely accepted that under certain circumstances corporate entities should be regarded as separate and distinct from their individual shareholders, it is also true and accepted that sometimes this concept of separate and distinct should be disregarded by the courts in the interest of preventing fraud or injustice to third parties. Upon a showing of good cause by a plaintiff, a court can decide to pierce the corporate veil, giving a third party plaintiff access to the personal assets of a company’s shareholders. This is also referred to as…

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