CSEET · Business Laws and Management · Elements of Company Law
Under the doctrine of lifting the corporate veil, what do courts essentially do?
Lifting the corporate veil means the court disregards the company's separate legal personality and looks at the real persons controlling it, usually to prevent fraud, evasion of law or misuse of the corporate form, and holds them responsible for the company's acts.
- ADisregard the separate legal personality of the company and look at the persons behind itCorrect
- BDissolve the company and distribute its assets to creditors
- CConvert a private company into a public company
- DRemove the directors and appoint new directors
Explanation
A company is a separate legal person from its members (Salomon v. Salomon). When it is used for fraud or to evade legal obligations, courts ignore this separateness and treat the real persons behind it as liable. The other options describe unrelated remedies.
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