Lifting of Corporate Veil | Company Law | Reema Baruah 

The corporate veil is a legal principle that treats a corporation as a separate entity from its shareholders. This means that the shareholders are not personally liable for the debts or liabilities of the corporation. However, in some cases, a court may pierce the corporate veil and hold the shareholders personally liable. This is known as lifting the corporate veil.
There are a number of factors that a court will consider when deciding whether to pierce the corporate veil. These include:
* Whether the corporation was used as a sham or a mere instrumentality to achieve an improper purpose.
* Whether the shareholders commingled their personal assets with the assets of the corporation.
* Whether the shareholders failed to observe corporate formalities, such as holding regular board meetings and keeping proper records.
* Whether the shareholders used the corporation to avoid paying debts or liabilities.
If a court finds that one or more of these factors are present, it may pierce the corporate veil and hold the shareholders personally liable.
Here are some examples of when the corporate veil may be pierced:
* A corporation is formed to defraud creditors.
* A corporation is used to evade taxes.
* A corporation is used to commit a crime.
* A corporation is used to shield the shareholders from liability for their actions.
Piercing the corporate veil is a drastic step that should only be taken in the most egregious cases. However, it is an important tool that can be used to protect the interests of creditors and other third parties.
Here are some tips to help you avoid having the corporate veil pierced:
* Use the corporation for its intended purpose.
* Keep separate personal and business accounts.
* Hold regular board meetings and keep proper records.
* Pay your debts on time.
* Comply with all applicable laws and regulations.
By following these tips, you can help to ensure that your corporation will be treated as a separate entity from its shareholders, and that you will not be personally liable for the debts or liabilities of the corporation.