Piercing Corporate Veil

Question 1

Piercing corporate language to use on essay

Answer 1

“While a court ought to be reluctant to distrub the limited liability regime, a court of equity will in an appropriate case pierce the veil and hold shareholders personally liable where the factors warranted are evident”

Question 2

Piercing the corporate veil factors (F.L.A.G.S.)

Answer 2

1. Fraud
2. Lack of adhereence to corporate formalities
3. Affliated corporations comingling personal and corporate finances
4. Gross undercapitalization
5. Shareholders comingling personal and corporate finances

Question 3

Failure to comply with corporate formalities

Answer 3

1. I.e. failure to hold meetings and keep corporate records
2. Principles of a de facto and de jure corporation, or corporation by estoppel should be taken into account

Question 4

What happens if corporate veil is pierced?

Answer 4

• Liability is imposed on shareholders who are active in management
• Liability is for full amoutn of the debt