Piercing the corporate veil

Common card · No. 364178

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 or other persons behind the corporation. 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 businessperson has left their job as a director and has signed a contract to not compete with the company they have just left for a period of time. If they set up a company which competed with their 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" or a "cover" and that, as the new company is completely owned and controlled by one person...

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