Question

When a court finds that the shareholders of a corporation are using the corporate structure to shield themselves from liability when acting for purely for personal purposes, the court may disregard the corporate structure and impose personal liability on the shareholders treating them like partners. This is called:

Answer 1

The correct answer would be, Piercing the Corporate Veil.

The court may disregard the corporate structure and impose personal liability on the shareholders treating them like partners. This is called as Piercing the Corporate Veil.

Explanation:

A corporation is a form of business in which there are officers called as the board of directors, who run the business as a separate legal entity.

There are shareholders in the corporation who have their shares or stakes in the company.

When a court finds that the shareholders of a corporation are using corporate structure as a shield from liability when acting purely for personal purposes, then in this situation, the court holds the shareholders and directors, personally liable for their actions and debts. This is called as Piercing the Corporate Veil.

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