Reverse Piercing And Integrity Of Corporate Personality
- IJLLR Journal
- 30 minutes ago
- 1 min read
Amrutha K, Sastra Deemed University, Thanjavur – School of Law
Miruthula A, Sastra Deemed University, Thanjavur – School of Law
ABSTRACT
Reverse piercing of corporate veil is considered to be an important theory that can challenge the conventional boundaries of corporate structure. On one hand, traditional veil piercing holds shareholders liable for company’s misconduct, reverse piercing on the other hand allows creditors or third parties to access corporate assets to satisfy the personal liabilities of individuals who are in control of the company. It relies on equity to stop fraud, expanding judicial oversight into cases of abuse of control and identity between the individual and the entity. This article deals with the foundations of reverse piercing, following its development in comparative jurisprudence and its origin to the alter ego principle. The factors that courts take into account, including fraud, inadequate capitalization, and non-observance of corporate formalities are analyzed, and the distinction between insider and outsider reverse piercing is explored. It also evaluates the challenges in the policy and focuses on the necessity of safeguarding innocent creditors. It includes examination of current developments in judicial reasoning, scholarly discourse and highlights how although reverse piercing is still unusual, its prudent use can improve accountability and preserve the essential harmony between justice and corporate autonomy.
