What Is the Definition of "corporate Veil"?

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The term "corporate veil" refers to the concept that a publicly traded company's shareholders are shielded from liability connected to that company's actions. If the company incurs corporate debts or breaks laws, the corporate veil concept dictates that shareholders should not be held liable for those errors.

Rather than being a literal shield, the corporate veil is a concept that nonetheless exists to ensure the safety of a company's shareholders in the event of that company's financial or legal misconduct. Though the corporate veil is typically respected, there are some cases in which the concept is disregarded. This is known as "piercing the corporate veil," and in these cases, judges may choose to hold shareholders liable for a company's actions. According to Cornell University's Legal Information Institute, specific rules regarding piercing the corporate veil may vary from state to state, but judges are typically reluctant to engage in this practice.