The Effects of Applying the Piercing the Corporate Veil Doctrine on Parent Companies and Liable Directors in Iranian and American Law

Abstract

The principle of relative independence and limited liability in commercial companies holds significant importance, ensuring the free and specialized operation of such entities. The application of these principles prevents personal profiteering and individual self-interest. However, in cases where shareholders, directors, or the parent company abuse this principle and hide behind the corporate veil for personal gain, invoking this principle is not only ineffective but also leads to corruption within commercial companies. In such instances, breaching this principle and holding shareholders, directors, or the parent company accountable becomes necessary. This study, conducted using a descriptive-analytical method, seeks to examine the effects of applying the piercing the corporate veil doctrine on parent companies and liable directors in Iranian and American law. The findings indicate that the U.S. legal system has been a pioneer in the application of the piercing the corporate veil doctrine, with its judicial practice having effectively utilized this doctrine. In contrast, under Iranian law, the application of the piercing the corporate veil doctrine is only possible through reference to general principles and common legal rules. The implementation of this doctrine ensures the continuation of the company's legal personality while holding the responsible party accountable for bankruptcy to settle creditors' debts. Thus, it serves as a preventive measure against corruption, profiteering, and the instrumental exploitation of commercial companies.