22.5.3 Piercing the corporate veil

In all jurisdictions studied, the involvement by the shareholder in the financing of the company can also lead to a direct or indirect piercing of the corporate veil. The term ‘piercing the corporate veil’ expresses the fact that despite the privilege of limited liability, the shareholder is nevertheless liable to the company’s creditors or to the company itself, because the corporate veil is being pierced or because the shareholder’s acts or omissions qualify as a wrongful act. Even though the dogmatic basis and details of the ‘piercing the corporate veil’ doctrine differ for each country, there are nevertheless a number of similarities between the countries. First of all, what stands out is that in all jurisdictions the ‘piercing the corporate veil’ doctrine as developed in case law has a strongly contextual and case-based character. American judges frequently use metaphors and long lists of relevant circumstances for piercing the corporate veil, which frequently conceal the underlying considerations. 1 Even though the German Bundesgerichtshof substantiates its rulings with clear findings and extensive references to legislation, case law and literature, on a number of occasions it has significantly amended the ‘piercing the corporate veil’ doctrine.2 In the Netherlands, the ‘piercing the corporate veil’ case law is also very much case based.3 The Supreme Court’s findings frequently focus on the specific circumstances of the case at issue, without formulating any general rules.

Despite this contextual and case-based character of the ‘piercing the corporate veil’ case law, the contours of the doctrine can be outlined in general terms; a number of similarities between the various countries stand out in this regard. For example, in all jurisdictions studied, piercing the corporate veil has exclusively been assumed in private companies with a limited number of shareholders. In addition, capital withdrawals at a time when the shareholder could foresee that after the withdrawal, the company would encounter continuity problems, can constitute a reason for piercing the corporate veil in all countries studied.

However, the consequences of ‘piercing the corporate veil’ are not the same in all countries. For example, in the American veil piercing proceedings, unauthorized withdrawals usually lead to direct liability of the shareholder to a specific creditor. In Germany, existenzvernichtenden Eingriffs no longer lead to any direct piercing of the corporate veil, but qualify as an unerlaubte Handlung vis-à-vis the company, so that the claim for compensation must be lodged by the company – usually the trustee in bankruptcy. In the Netherlands, unauthorized capital withdrawals may constitute a wrongful act vis-à-vis the collective creditors. This means that both an individual creditor and the bankruptcy trustee acting on behalf of the collective creditors can commence legal action against the shareholder.