Newsletter-21

42 NEWSLETTER 2016 Intermingling of Funds and Assets of Shareholders and Entities Shielding personal assets from corporate liabilities is generally one of the primary purposes of incorporation. However, failing to keep corporate and personal assets distinct with the purpose of misleading third parties, whereby a shareholder aims to keep its identity disguised with respect to ownership of the assets, may lead to lifting the corpo- rate veil. Lifting may apply where a parent or holding company fails to ensure the necessary distinction between its own assets and those of its subsidiary (horizontal intermixing of the assets). Conclusion One of the major goals behind the concept of the limited liability of shareholders is to protect shareholders from being liable for the company’s debts and other obligations. As an exception to this general limited liability principle, lifting the corporate veil is an instrument that protects the interests of third party creditors. The necessity to lift the corporate veil may occur in situations related to insufficient capital ( deficiency of shareholders equity ), shareholders’ abuse of the corporate entity, and intermingling of the assets contrary to the good faith principle. In fact, under certain cir- cumstances likely to occur in practice, the “separateness principle” may result in unjust results, and lifting the corporate veil thus assures the legal certainty.