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Simple English definitions for legal terms
veil-piercing
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A quick definition of veil-piercing:
Veil-piercing is when a court holds people who own or run a company responsible for the company's bad actions. Normally, these people are protected from being personally responsible for what the company does. But if the court thinks they did something wrong, they can be held responsible. This is also called disregarding the corporate entity. It can be hard to predict when this will happen because there isn't a clear rule for it.
A more thorough explanation:
Veil-piercing is a legal term that refers to the act of holding corporate officers, directors, and shareholders personally liable for the wrongful acts of a corporation. This is done by disregarding the legal separation between the corporation and its owners, which is known as the corporate veil.
For example, if a corporation is sued for breach of contract and it is found that the owners of the corporation used it as a personal piggy bank, the court may decide to pierce the corporate veil and hold the owners personally liable for the damages.
Another example would be if a corporation is found to have engaged in fraudulent activities, and it is determined that the owners were aware of and participated in the fraud. In this case, the court may also decide to pierce the corporate veil and hold the owners personally liable for the damages.
Overall, veil-piercing is a legal tool that is used to prevent individuals from using the corporate form to shield themselves from personal liability for wrongful acts committed through the corporation.