Piercing the Corporate Veil in Carlton v Walkovszky - Case Study Example

The issue is whether Carlton has legally incorporated his tax-cabs into 10 different corporations to avoid liability of paying higher damages. Therefore, does the incorporation of the 10 corporations amount to breaking the law, which would necessitate the piercing of the corporate veil? The rule of law provides that the piercing of the corporate veil can occur when the corporation is created as a mere alter-ego of its owner, where the corporation does not observe the right formalities, or where the corporation is undercapitalized (Mallor et al., 2013). Further, a court can lift the corporate veil to hold the owners of the corporation personally responsible, if the corporation is created to promote fraud, illegality or injustice (Mallor et al., 2013). The issue is whether Carlton has legally incorporated his tax-cabs into 10 different corporations to avoid liability of paying higher damages.

Therefore, does the incorporation of the 10 corporation amount to breaking of the law, which would necessitate the piercing of the corporate veil? The rule of law provides that the piercing of the corporate veil can occur when the corporation is created as a mere alter-ego of its owner, where the corporation does not observe the right formalities, or where the corporation is undercapitalized (Mallor et al., 2013). Further, a court can lift the corporate veil to hold the owners of the corporation personally responsible, if the corporation is created to promote fraud, illegality or injustice (Mallor et al., 2013). 3.

Analysis SectionThe creation of 10 taxi-cab corporations by Carlton is legal, owing to the fact that the law provides for incorporation of enterprises, for the sake of limiting personal liability (Mallor et al., 2013). Further, there has not been provided any limitation as to the number of taxi-cabs that should constitute a tax-cab corporation. In addition, Carlton has provided the required $10,000 of accident liability insurance for each cab. 4. Conclusion StatementThe court should not lift the corporate veil to find Carlton personally liable.

This is because; the incorporation of the 10 tax-cab corporations is not an illegality, while the purpose of such incorporation is merely to limit personal liability, and not to commit fraud, illegality or injustice, which could be reasonable ground for lifting the corporate veil (Mallor et al., 2013). Therefore, the court should find that Walkovszky should only hold liable the corporation with two taxi-cabs, from which one knocked him down.