When attempting to determine liability for the actions of a corporation, two common law doctrines come into play: the doctrine of lifting the corporate veil and the corporate attribution doctrine. Both are employed when the status of a corporation as a separate legal entity requires a distinction from the acts of its officers, leading to exceptions to the principle of limited liability or separate legal entity. However, these doctrines diverge in their applicable tests.
The Test of Lifting the Corporate Veil in Canadian Courts
Canadian courts utilise a two-part test[1] in determining whether to lift the corporate veil. The first part requires there to be not just ownership or control of a corporation but complete domination or abuse of the corporate form. The second part requires there to be fraudulent or improper conduct, with the liabilities sought to be enforced arising directly from this conduct. If both elements are present, the corporate veil may be lifted, preventing the person engaged in such conduct from asserting that the liabilities lie squarely with the corporation.
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