Question

63. List the primary differences between a civil case and a criminal case

64. Under what situations may a court of equity disregard the corporate entity and pierce the corporate veil? What is the legal effectof the decision?

Business Law class. ( Please short answers )

Answer 1

Ans - 63 The most Common differences between a civil case and criminal case are:-

(1) Generally, civil cases and criminal cases have different punishments.

(2) Criminal cases are considered a crime against society or state but in civil cases, the offense is not considered as against the society.

(3) Generally and in almost every criminal cases trial by jury is allowed.

(4) The standard of proof is very high in a criminal case whereas in civil cases the standard of proof is not that high. This difference exists because civil cases are considered less blameworthy and the punishments are not that sever

Ans:- 64 understanding the concept of Pierce the corporate veil:- Generally the business owners and the managers of the company choose to form a corporation or an LLC i.e Limited liability company because they don't want themselves to be held responsible for personal liabilities or debts if the company is unable to pay its creditors. But some times court will hold the corporate entity members and their owners personally liable for business debts and when this happens it is known as piercing the corporate veil.

Need to Pierce the corporate veil - for example, if you are running a business who has recently provided goods or services to its client( e.g a corporate entity) but you did not get the payment. Now you will try to sue the company for payment but you found out that the company has closed down and has no assets. Now suppose if you found out that the company's owner has still some assets left and he may be planning to use it to start a new company. In this scenario you may be able to access the owner's asset by piercing the corporate veil.

Circumstances under which court will pierce the corporate veil

1) If the court finds out that there is no legal separation between the company's business and its owner's personal finance than the court may decide to pierce the corporate veil.

2 Companys action is fraud- If the court finds out that the owner of the company has borrowed heavily and made business deals knowing that the company may not be able to pay its debt then the court will pierce the corporate veil.

3 Tax evasion - If the corporation is deliberately formed to evade taxes then the court will pierce the corporate veil.

4 If the corporation is an agent for its shareholder or acts as an agent then shareholder will be held responsible for its action.

Legal effects of the decision: If the decision to pierce the corporate veil is taken by the court then the owners, shareholder, or the members of the corporation will be held personally responsible for debts of the business. It means that creditors will go after their personal assets to collect their debts.