Discuss About The Directing Mind And Piercing Corporate Veil?
This is any employee in charge, mostly directors and managers performing certain functions for the corporation as directed and authorized by the board of directors. He benefits the company and is held personally liable if he acts outside his mandate. He has a role in setting the policy and managing an important part of the organization's activities. Thus, he is in control over the company’s affairs. He is also the ego and the center of personality for the company (Stephen Judge, 2014).
A corporation, being a legal entity lives through the person in charge who is liable for its actions. A crime’s liability committed by the corporate entity is attributed to the person in control of the company. He is held liable for the crime or fault committed under his supervision (Bourne, 2016). If the directors or the management are guilty of any crime, the company is also guilty because they are the company by being in charge.
If a person of a lower level in the corporation commits a crime in the name a corporation, the company is not held liable for the crime. This may be so if the company has set a division between the senior management and employees to avoid any criminal charges against them. If not, the director or manager who is the directing will of the company is held liable.
Limited liability company owners may structure their business in a corporation manner to shield its members from personal liability for the debts or criminal liabilities of the company.
Piercing The Corporate Veil
This is when the courts hold the corporation’s owner, shareholders or members personally liable for business debts though it is a legal entity (Bourne, 2016). It also is a legal decision to treat the corporation’s rights or duties as its shareholders' rights or liabilities. A corporation is usually treated as a separate legal person and it is responsible for the debts incurred and benefits from the credit it is owed.
The shareholders or the managing directors may be held personally responsible for using the corporation as an instrumentality for their own personal business or for the achievement of any wrongful gains done under the business corporate veil shield by applying the alter ego doctrine.
If a company’s corporate veil is pierced by the court, it means that the shareholders, members, and owners will be held personally liable for the corporate debts. The creditors can satisfy the corporate debt by going to the owners’ home, investments, bank account, and other assets (Bourne, 2016). Though, personal liability is imposed by the court on the individuals responsible for the corporation wrong and fraudulent doings.
The corporate veil is pierced by the court if the company’s creditor incurred an unjust cost, there is no real separation between the owner and the company and if the actions by the company were wrong or fraudulent. It can be avoided by documentation of all the business actions, ensuring adequate business capitalization, making the corporate status known, undertaking necessary formalities and not co-mingling business assets with personal assets (Stephen Judge, 2014).
Bourne, N. (2016) Bourne on Company Law, Nicholas Bournerevised, annotated edition, Abingdon: Accounting.
Stephen Judge, I.M. (2014) business Law: 2014 and 2015, Oxford: Oxford University Press.