What is piercing the corporate veil UK?

What is piercing the corporate veil UK?

Piercing the corporate veil, also known as lifting the corporate veil, is a term often used by parties seeking to pursue the directors personally, in the event of corporate insolvency. The concept of limited liability within UK company law generally prevents this.

How do I pierce the corporate veil UK?

The corporate veil can only be pierced if there is some “impropriety.” The court cannot pierce the corporate veil just because the company is involved in some impropriety. The impropriety must be linked to the use of the company structure to avoid or conceal liability.

What is the principle of piercing the corporate veil?

1. The piercing or lifting of the corporate veil refers to a legal decision by a competent forum to disregard the limited liability of a corporation, treating its rights or duties as rights or duties of its shareholders.

Why should the corporate veil be pierced?

A key reason that business owners and managers choose to form a corporation or limited liability company (LLC) is so that they won’t be held personally liable for debts should the business be unable to pay its creditors. When this happens it’s called “piercing the corporate veil.”

When can the veil of incorporation be lifted UK?

[21] In Ben Hashem v Shayif,[22] Munby J sought to put an end to family disputes and looser views in lifting the corporate veil. He set out that the veil can be only lifted when control and ownership of the company involves impropriety which is linked to the use of the company structure to conceal or avoid liability.

When can the veil be pierced?

a court cannot pierce the veil merely because to do so would be in the interests of justice. the corporate veil can only be pierced when there is impropriety. impropriety “must be linked to use of the company structure to avoid or conceal liability”

When can corporate veil be lifted UK?

The corporate veil in the UK is, however, capable of being “lifted”, so that the people who run the company are treated as being liable for its debts, or can benefit from its rights, in a very limited number of circumstances defined by the courts.

What is piercing the veil of incorporation and why is it important?

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. Therefore, this shareholder limited liability emanates mainly from statute.

When might a court pierce the corporate veil under common law?

Three circumstances where commentators maintain that the corporate veil ought to be pierced will now be considered: where the veil is pierced to impose liability on the directors of the company; where the company is closely held; and where the company has committed a tort.

When can the veil of incorporation be lifted?

In Life Insurance Corporation of India v Escorts Ltd [1986], the Honourable Supreme Court asserted that the veil may be lifted in cases where the aim is to avoid a taxation statute or to evade obligations imposed by the law or for the protection of public interest.

When can a company lift its corporate veil?

In Prest, Lord Sumption held that the corporate veil could be pierced or lifted if the company is being abused for the purpose of some wrongdoings. However, it is difficult to identify the nature of the relevant wrongdoing.

What does it take to pierce the corporate veil?

To pierce the corporate veil, the creditor or injured party must prove that the business was not functioning as a separate entity and that the lines between the business and its owner were blurred. This is often called the “alter ego” theory; that is, the business was operating as an alter ego of the business owner himself.

What does it mean to say “piercing the corporate veil”?

The phrase piercing the corporate veil is used to describe the action of a court to hold corporate shareholders and LLC owners personally liable for the debts and liabilities of a corporation.

What does it mean to “pierce the corporate veil”?

“Piercing the corporate veil” refers to a situation in which courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts. Veil piercing is most common in close corporations.

When might the corporate veil be pierced?

The corporate veil may be pierced is in cases in which a corporate or LLC officer or owner may be liable for debts of the business. For example: For payment of payroll taxes, including federal and state withholding and FICA taxes.

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