Piercing the Corporate Veil

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Lifting the veil of incorporation or better still; "Piercing the corporate veil" means that a court disregards the existence of the corporation because the owners failed to keep one or more corporate requirements and formalities. The lifting or piercing of the corporate veil is more or less a judicial act, hence it's most concise meaning has been given by various judges. Staughton LJ, for example, in Atlas Maritime Co SA v Avalon Maritime Ltd (No 1)29 defined the term thus: "To pierce the corporate veil is an expression that I would reserve for treating the rights and liabilities or activities of a company as the rights or liabilities or activities of its shareholders. To lift the corporate veil or look behind it, therefore should mean to have regard to the shareholding in a company for some legal purpose."30 Young J, in Pioneer Concrete Services Ltd v Yelnah Pty Ltd,31 on his part defined the expression "lifting the corporate veil" thus: "That although whenever each individual company is formed a separate legal personality is created, courts will on occasions, look behind the legal personality to the real controllers."32 The simplest way to summarize the veil principle is that it is the direct opposite of the limited liability concept. Despite the merits of the limited liability concept, there is the problematic that it can lead to the problem of over inclusion, to the disadvantage of the creditors. That is to say the concept is over protected by the law. When the veil is lifted, the owners' personal assets are exposed to the litigation, just as if the business had been a sole proprietorship or general partnership. Common law courts have the lassitude or exclusive jurisdiction "lift" or "look beyond" the corporate veil at any time they want to examine the operating mechanism behind a company.33 This wide margin of interference given common law judges has led
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