LLM Student at Amity Law School, Amity University, Bengaluru, India
Assistant Professor at Amity Law School, Amity University, Bengaluru, India
Corporate accountability is a fundamental principle of modern business law, promoting responsible and transparent operations that respect the rights of stakeholders, including shareholders, employees, consumers, and society. As corporations function as separate legal entities, their accountability spans legal, financial, and ethical dimensions, safeguarding against abuses arising from limited liability. While limited liability encourages entrepreneurship by protecting shareholders from personal responsibility, it also poses risks of misuse, such as fraud or evasion of obligations. The doctrine of piercing the corporate veil addresses these concerns by enabling courts to hold individuals personally liable when corporate structures are exploited for wrongful purposes. This doctrine acts as a critical counterbalance, ensuring that the benefits of limited liability do not shield unethical behaviour. Courts invoke veil-piercing in instances of fraud, undercapitalization, or neglect of corporate formalities, as demonstrated by landmark cases like Salomon v. Salomon & Co. Ltd and Gilford Motor Co. Ltd. v. Horne. These cases underline the judiciary's role in preventing the misuse of corporate structures and reinforcing accountability. Beyond legal compliance, corporate accountability encompasses financial transparency, ethical behaviour, and corporate social responsibility (CSR). As multinational corporations increasingly shape the global economy, their responsibilities extend to environmental sustainability, consumer rights, and labor practices. However, the complexity of corporate operations can obscure accountability, complicating efforts to trace responsibility for misconduct. The veil-piercing doctrine addresses this gap, ensuring individuals behind corporations remain answerable for abuses. While courts apply this doctrine cautiously, requiring substantial evidence, it remains a vital mechanism for deterring unethical practices and promoting justice. By reinforcing the ethical foundations of corporate governance, piercing the corporate veil protects stakeholder interests and fosters a business environment centred on fairness, transparency, and ethical conduct.
Research Paper
International Journal of Legal Science and Innovation, Volume 7, Issue 1, Page 57 - 66
DOI: https://doij.org/10.10000/IJLSI.112355This is an Open Access article, distributed under the terms of the Creative Commons Attribution -NonCommercial 4.0 International (CC BY-NC 4.0) (https://creativecommons.org/licenses/by-nc/4.0/), which permits remixing, adapting, and building upon the work for non-commercial use, provided the original work is properly cited.
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