Piercing the corporate veil
From Wikipedia, the free encyclopedia
“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. Common law countries usually uphold this principle of separate personhood, but in exceptional situations may “pierce” or “lift” the corporate veil.
A simple example would be where a businessman has left his job as a director
and has signed a contract to not compete with the company he has just left
for a period of time. If he set up a company which competed with his former
company, technically it would be the company and not the person competing.
But it is likely a court would say that the new company was just a “sham”, a
“fraud” or some other phrase, and would still allow the old company to
sue the man for breach of contract. A court would look beyond the legal
fiction to the reality of the situation.
Despite the terminology used which makes it appear as though a shareholder’s limited liability emanates from the view that a corporation is a separate legal entity, the reality is that the entity status of corporations has almost nothing to do with shareholder limited liability. For example, English law conferred entity status on corporations long before shareholders were afforded limited liability. Similarly, the Revised Uniform Partnership Act (RUPA) confers entity status on partnerships, but also provides that partners are individually liable for all partnership obligations. Thus, this shareholder limited liability emanates mainly from statute.”
Definition: A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally
liable for the company’s debts and other obligations. This protection is not
ironclad or impenetrable. Where a court determines that a company’s business
was not conducted in accordance with the provisions of corporate legislation
(or that it was just a façade for illegal activities) it may hold the
shareholders personally liable for the company’s obligations under the legal
concept of lifting the corporate veil.
This free online business name lookup tool will search the Secretary of State’s database of registered business names. New Hampshire law requires that anyone doing business under any name other than his or her own must register that name with the Secretary of State. The Secretary of State will not register a name that is not distinguishable from a name that is registered.