Piercing the Corporate Veil and Its Variations (On the Example of German, American, and English Legal Practices)
DOI:
https://doi.org/10.60131/jlaw.2.2024.8319Keywords:
Piercing the corporate veil; reverse veil piercing; lifting the veil; annihilating interference.Abstract
The capital form of a corporate entity is currently the most prevalent form of conducting business worldwide, driven by its diverse, profitable, convenient, and investor-oriented structure. Specifically, the privilege of limited liability encourages interested parties to boldly diversify their business portfolios without the risk of losing personal assets. However, this fundamental principle of corporate law also has exceptions, known as piercing the corporate veil. Most developed countries agree that in certain cases, it is unavoidable and necessary to invoke this exceptional measure to maintain or restore justice. This pertains to the personal liability of partners in cases of "abuse of rights" within the corporate structure.
This paper examines the concept of piercing the corporate veil and the various approaches developed and established in different countries. Following the introduction, there is a brief historical overview of the formation of this doctrine, which thematically encompasses the essence of legal entities—legal fictions—and their independent, separate legal status, logically leading to the possibility of disregarding this separation through exceptional measures.
It is crucial to highlight the legal foundations that legitimize the application of traditional piercing of the veil in the judicial practices of different countries, making the essence of the sub-types of this doctrine comprehensible to the reader. Additionally, the research aims to showcase the similarities and differences with variations such as reverse veil piercing in American law and the doctrine of lifting the veil in English law. Furthermore, the paper presents the latest approaches of German courts regarding the application or restraint from piercing the veil, where the aforementioned American/English terminology is not used, yet the approaches are fundamentally closely related. The conclusion summarizes the results of the research conducted around the topics discussed in the article.
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