One of the primary benefits of creating a corporate entity is to limit the liability of the shareholders. However, under certain circumstances the corporate entity may be disregarded. This is also known as piercing the corporate veil and is the most frequent method for holding the shareholders liable for the acts of a corporation. Corporate officers, directors and controlling shareholders have a general fiduciary duty of loyalty and care which should govern all their corporate conduct. Unless they breach that duty by gross negligence or acts in bad faith, they usually will have no personal liability to third parties. In order to pierce the corporate veil, third parties have to show personal wrongful conduct on the part of a company official or director to hold them personally responsible for extra-corporate actions. Under the doctrine of piercing the corporate veil, the courts may decide not observe the separation of the corporate entity from its stockholders, and it may deem the corporation's acts to be those of the persons or organizations actually controlling the corporation. This is based upon a finding by the court that the corporate form is used to perpetuate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose. A court may pierce through the veil of liability protection if the corporation does not follow proper corporate formalities, if it is undercapitalized, or if it can be shown that it is a sham that was set up to defraud. If the corporate formalities are not followed, the corporation may be deemed to not be functioning as a corporation, but rather, as the alter ego of the owners. To prevent the corporate veil from being pierced, it is important to keep minutes of the board meetings and to not co-mingle bank accounts. These measures help to ensure that the corporation will be treated as a separate entity. 1.2 Research Problem
The major question to be addressed is:
What are the legal provisions, grounds and practices relating to the Doctrine of Lifting the Corporate Veil? And it is sufficiently utilized or not in the Nepalese context?
The basic objectives of this paper are:
1.To describe the concept of Doctrine of Lifting the Corporate Veil. 2.To analyze the utilization situation of the doctrine in Nepalese Context.
The corporate entity is separate legal entity than its shareholders, directors and employees. The owners of the company will have only the limited liability extended to their enrolment in share holdings. But in certain conditions, the act of the company might be addressed due negligence or wilfull fraud. So it is clear that the company cannot act on its own and the act is carried by the directors. The doctrine is important to find out the actual scenario behind the name of the company. So it is mostly important when the directors carry out the act which is done in the name of the company but is done for the sole benefit of the directors only or to carry out the acts that are not supposed to be done as per the law.
This paper has been written only for academic purpose.this paper has been written on the base on library study and only on available documentary sources in given time frame. So the subject is not dealt with in great depth. Moreover, the time-limitation that required the paper to be submitted within a prescribed span of time limited detailed and exhaustive study and research on the topic. The specific topic itself also poses some limitation, so the paper will only cover the basic conceptual part of the topic. This academic paper tries to give clear concept about the usage of the doctrine of Lifting the Corporate Veil in Nepalese context
1.6 Organization of the study
This paper is organized into six chapters. First chapter will be introductory where as second chapter will show the review of past literatures carried out by prominent researchers....