When does the corporate veil gets pierced?


A company is a legal person distinct from its members and enjoys the privileges of limited liability, perpetual succession, corporate personality, etc.., however in certain circumstances, this corporate veil has been pierced to look behind the corporate entity and take action, as if the company and members are one and the same. It would amount to the piercing of corporate veil in any one of the following circumstances:-

1. When the liability of the members of a limited company is made unlimited.

2. When the directors of the company are made personally liable for the acts done by them on behalf of the company.

3. When the legal entity concept is discharged removing the separate existence of the company from that of its members. Thus, the lifting of the corporate veil could be statutory (or) judicial.

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