Understanding Legal Terms: Directing Mind and Corporate Veil Explained

This report provides an in-depth analysis of two key legal concepts: 'Directing Mind' and 'Piercing the Corporate Veil'. It begins by defining 'Directing Mind' as the individuals within a corporation, such as directors and managers, who are responsible for setting policies and managing the company's affairs. It explains their liability for actions taken under their supervision. The report then explains 'Piercing the Corporate Veil', detailing how courts may hold shareholders or members personally liable for business debts. It outlines the conditions under which the corporate veil may be pierced, such as when the corporation is used for personal gain or wrongful actions. The report emphasizes the importance of proper business practices to avoid personal liability, including documentation, capitalization, and separation of assets. References to legal texts are also provided.

Running Head: Explaining Law Terms 1
Directing Mind And Will, and Piercing The Corporate Veil
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Explaining Law Terms 2
2. a) Directing Mind and Will
This is any employee in charge, mostly directors and managers performing certain
functions for the corporation as directed and authorized by the board of directors. He benefits the
company and is held personally liable if he acts outside his mandate. He has a role in setting the
policy and managing an important part of the organization's activities. Thus, he is in control over
the company’s affairs. He is also the ego and the center of personality for the company (Stephen
Judge, 2014).
A corporation, being a legal entity lives through the person in charge who is liable for its
actions. A crime’s liability committed by the corporate entity is attributed to the person in control
of the company. He is held liable for the crime or fault committed under his supervision (Bourne,
2016). If the directors or the managers are guilty of any crime, the company is also guilty
because they are the company by being in charge.
If a person of a lower level in the corporation commits a crime in the name a corporation,
the company is not held liable for the crime. This may be so if the company has set a division
between the senior management and employees to avoid any criminal charges against them. If
not, the director or manager who is the directing will of the company is held liable.
Limited liability company owners may structure their business in a corporation manner to shield
its members from personal liability for the debts or criminal liabilities of the company.
2. b) Piercing The Corporate Veil

Explaining Law Terms 3
This is when the courts hold the corporation’s owner, shareholders or members
personally liable for business debts though it is a legal entity (Bourne, 2016). It also is a legal
decision to treat the corporation’s rights or duties as its shareholders' rights or liabilities. A
corporation is usually treated as a separate legal person and it is responsible for the debts
incurred and benefits from the credit it is owed.
The shareholders or the managing directors may be held personally responsible for using
the corporation as an instrumentality for their own personal business or for the achievement of
any wrongful gains done under the corporate veil shield by applying the alter ego doctrine.
If a company’s corporate veil is pierced by the court, it means that the shareholders,
members, and owners will be held personally liable for the corporate debts. The creditors can
satisfy the corporate debt by going to the owners’ home, investments, bank account, and other
assets (Bourne, 2016). Though, personal liability is imposed by the court on the individuals
responsible for the corporation wrong and fraudulent doings.
The corporate veil is pierced by the court if the company’s creditor incurred an unjust
cost, there is no real separation between the owner and the company and if the actions by the
company were wrong or fraudulent. It can be avoided by documentation of all the business
actions, ensuring adequate business capitalization, making the corporate status known,
undertaking necessary formalities and not co-mingling business assets with personal assets
(Stephen Judge, 2014).

Explaining Law Terms 4
References
Bourne, N. (2016) Bourne on Company Law, Nicholas Bournerevised, annotated edition,
Abingdon: Routledge.
Stephen Judge, I.M. (2014) Company Law: 2014 and 2015, Oxford: Oxford University Press.