General Studies · Corporate Veil and Separate Legal Entity
Fitt, a top-performing salesman for Doc Co, has a restrictive covenant in his employment contract preventing him from soliciting Doc Co's clients for two years post-employment. Upon resigning, Fitt immediately incorporates Gen Ltd. Fitt and his wife are the sole shareholders and directors. Gen Ltd begins aggressively soliciting Doc Co's clients. Doc Co seeks an injunction against both Fitt and Gen Ltd. Which of the following best describes the likely legal outcome?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The court will order the compulsory winding up of Gen Ltd on the just and equitable ground rather than lifting the veil.
- 2Doc Co's only remedy is a claim for damages against Fitt personally; the separate personality of Gen Ltd remains inviolable in commercial contract law.
- 3The court will lift the corporate veil because Gen Ltd is a 'sham' or 'façade' created specifically to evade an existing legal obligation.✓
- 4The court will refuse the injunction against Gen Ltd because it is a separate legal entity from Fitt and was not a party to the original employment contract.
Correct answer
The court will lift the corporate veil because Gen Ltd is a 'sham' or 'façade' created specifically to evade an existing legal obligation.
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