Question

Ralph formed a corporation as a fund manager. He accepted money from his customers, promising to invest it and build cash value for them. Instead, he kept the money for himself to enjoy a lavish lifestyle. The court removed liability protection from his corporate entity because the incorporation had been used to perpetuate fraud. This is an example of:

Answer 1

Answer: a. piercing the corporate veil.

Explanation:

Also known as LIFTING THE CORPORATE CURTAIN, Piercing the Corporate Veil is a situation where even though Corporations are considered separate entities from their owners and therefore they cannot be sued if the Corporation is sued, the court holds the ownners responsible for the debts and liabilities of the Corporation.

This is usually done in situations of FRAUD or where the Court funds that there was a wilful and egregious activity by the owners of officers of the company that put Corporate gain over the public good.