That is an incorrect statement as written.
The phrase "piercing the veil" means holding the directors (and possibly owners) of a corporation legally liable, rather than holding only the business entity liable.
It applies when the director is a wrongdoer, acting in bad faith or in breach of fiduciary duty.
But the business entity is always liable as well, unless the actions of the director are so bad, and so against corporate policy, that the corporation as an entity can be considered a victim rather than a co-perpetrator of the wrong.
So piercing the veil does not mean the business entity cannot ever be reached.
2007-07-24 12:35:51
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answer #1
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answered by coragryph 7
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This is a bit misleading, I suppose the author is trying to explain how the officers of a corporation will be held personally responsible, but the entity will not. Such as in Enron, the executives go to jail, and the company gets bankruptcy protection.
If IS possible to hold a corporation personally responsible, but this is through civil cases, the government, and the press. Some hedge funds may take a company over as well and sell off the assets if these sorts of things significantly damage share prices.
I suppose the main point of the author is that corporations act as shields for criminal enterprises. A company can continue to act illegally when making a profit as long as those who are brought to justice do not significantly alter enterprises...
2007-07-24 19:36:43
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answer #2
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answered by Discipulo legis, quis cogitat? 6
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The sole purpose of peircing the corporate viel is to get past the business entity and go after the individual, who owns it, as well as the entity. It is used not when suing huge corporations like Microsoft or IBM, which have plenty of money. Major corporations can pay a judgment entered against them.
It is used when a small, poor company is controlled by an individual (or another, larger and wealthier company). That individual often takes all the money out of the company as fast as the company earns it. Those companies have no assetts with which to pay a judgment. Therefore, you peirce the veil to be allowed to go after the person who has the money (and often times that is the same person who caused the company to do whatever act caused the lawsuit to start with).
2007-07-24 19:44:01
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answer #3
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answered by mcmufin 6
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Generally, the directors, officers, and shareholders are not personally liable for tortious acts of the corporation and the debts of the corporation. However, when a court decides to pierce the corporate veil, the corporation and the directors, officers, or shareholders may also be held liable for the tortious acts of the corpoartion or its debts. Courts may pierce the corporate veil when (1) the corporation is the alter ego of the officers, directors, or shareholders or (2) the corporation was undercapitalized at the time of formation.
2007-07-24 21:01:47
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answer #4
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answered by Edward r 2
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