---
title: "Piercing the Corporate Veil"
type: Legal Term
source: https://casebriefly.com/legal-terms/piercing-the-corporate-veil
---

# Piercing the Corporate Veil

Piercing the corporate veil is an equitable doctrine that allows courts to disregard the separate legal identity of a corporation and hold shareholders personally liable for corporate obligations. Courts typically apply a multi-factor test examining whether the corporation was used as a mere alter ego or instrumentality of the shareholder, looking at factors such as commingling of funds, failure to observe corporate formalities, undercapitalization, and use of the corporate form to perpetrate fraud or injustice. The doctrine is applied sparingly because it undermines the fundamental principle of limited liability, and the burden falls on the party seeking to pierce the veil to demonstrate that respecting the corporate form would sanction fraud or promote injustice.

## Related Terms

- limited-liability
- articles-of-incorporation
- llc
- fiduciary-duty-corporate

## Related Cases

- dodge-v-ford-motor-co

## Example

When a sole shareholder used his corporation's bank account to pay personal expenses, never held board meetings, and left the company grossly undercapitalized, the court pierced the corporate veil and held the shareholder personally liable for the corporation's unpaid debts to a supplier.

---
Source: [Piercing the Corporate Veil — CaseBriefly](https://casebriefly.com/legal-terms/piercing-the-corporate-veil)