From the course: Business Law for Managers
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The corporate veil and corporate wrongdoing
From the course: Business Law for Managers
The corporate veil and corporate wrongdoing
- A legally formed corporation is considered its own entity under the eyes of the law. Think of it like this. It's like a person. Now, the courts will use the concept of piercing the corporate veil if that person has a bad personality, so to speak. In other words, the courts hold you or the other officers or managers of the company personally responsible for the financial obligations of the company. Now, don't get lost. Stay with me. I'll explain. Let's say the corporation is liable to a host of creditors, entered into contracts with no way to pay its bills. The officers, managers, or members were not keeping separate bank accounts for the company or try to pass its bills off to one of the smaller companies it owns. That's a bad personality, so to speak, and the courts may then pierce the corporation and hold the individuals in charge personally liable for the company's debt. The courts may attach the personal assets of the individuals to cover those debts. So how does a corporation…
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