When shareholders invest into a corporation, there is an expectation of limited losses amounting to the financial investment made. However, if the company is not properly run, officers, directors and shareholders are exposed to the blade of the law. This is known as piercing the corporate veil. Therefore it is critical for any shareholder, director, or officer of a small corporation to understand what is required to protect your personal assets from exposure to creditors and the long arm of the government.
Fraudulent acts is a legal term used in business. It covers an illegal act by an officer, director, or owner of a business operation. Often used in ‘Piercing the Corporate Veil’ for a creditor to gain access to the personal assets of the shareholder(s) of an incorporated business operation. If a fraudulent act occurs, the perpetrator does not receive protection under the law that the corporate shield provides.