LIFTING CORPORATE VEIL

Lifting Corporate Veil



Abstract

The aim of the paper is to discuss the concept of Lifting Corporate Veil and the purpose of it. The paper will help us determine the factors that affect the decision making up of the court in imposing such laws. The paper will discuss the pros and corns of Lifting Corporate Veil. The paper will help us analyze the importance of Lifting Corporate Veil.

Lifting Corporate Veil

Introduction

The doctrine known as piercing the corporate veil is the court decision by which the participant of a corporation is bound by the debts of the same. Such a doctrine contrary to the general rule of law under which the partners have limited liability with respect to the debts of the company in which they participate (usually limited participation or amount invested).

Research Aim

The aim of the research is to assess the concept of Lifting Corporate Veil and study the factors leading to such laws and decisions.

Discussion

Origin of Limited Liability

Societies exist in part to shield shareholders from liability for debts that may arise in the management of society. Before the invention, during the seventeenth century, the merchant figure limited partnership any partner could answer for the debts of the partnership. At that time there was the need to address large investments, which was necessary for the mobilization of capital immense, but the capitalists were reluctant to invest their money for the possibility, if the business failed to respond in the entire debt social.

Currently the recognition of social persons with legal personality can be mobilized enormous capital invested in the most diverse projects. Shareholders have no responsibility for loss of society, put another way: not liable for the obligations of third bearing against society. Similarly, officers, directors and employees of the company are not liable for loss of society, as if they had to answer for the debt would be less willing to do their jobs. However, there are companies that have a very small number of shareholders that even in so-called sole proprietorships, may be only one. In such cases the partners are often also, and simultaneously, managers and employees. Judicial practice has shown that in such societies may be situations in which managers, using the social clothing, commercial operations carried out outside the law, both with intent to defraud to other operators, as the purpose of tax evaders.

From its inception veil-piercing has been a scourge on corporate law. Exactly when the veil of limited liability can and will be circumvented to reach into a shareholder's own assets has befuddled courts, litigants, and scholars alike. And the doctrine has been bedeviled by empirical evidence of a chasm between the theory and practice of veil-piercing; notably, veil-piercing claims inexplicably seem to prevail more often in Contract than Tort, a finding that flouts the engrained distinction between voluntary and involuntary creditors.

With a dataset of 2,908 cases from 1658 to 2006, this study presents the most comprehensive portrait of veil-piercing decisions ...