Veil of incorporation:

The veil of incorporation protects the director(s) of a company which has committed wrong from prosecution. This means that the company is liable for the wrongdoing, not the individual director(s). The incorporation of a company raises a separate legal liability in the new company, which is distinct from that of the company's directors and shareholders.

When is the veil of incorporation lifted?

Answer:

the veil of incorporation may be lifted where a company is a sham and no third party has an involvement with it it may also be lifted where the company is a party to a fraud it will not be lifted just because justice demands a director can escape personal liability to a third party in negligence by acting through his company and ensuring that he is perceived as accepting no personal liability for what he is doing he cannot escape personal liability where he acts fraudulently on behalf of his company

How:
Gather evidence that the corporation is engaged in one of four activities that can serve as the basis for piercing the corporate veil. Collect financial records, testimony from other vendors and creditors, proof that certain corporate formalities do not exist and anything else that can support a claim that the corporate entity is not functioning according to legal parameters. Prove that the owners regularly co-mingle personal and business assets without keeping good records; or that the corporation is effectively insolvent and has never been properly capitalized; or the owners observe none of the corporate formalities required by law; or fraud in the conduct of its affairs with creditors. Draft a petition asking the court to disregard the corporate entity. Detail the facts that would support the extraordinary relief of piercing the corporate veil. Assert that you have been somehow damaged by the conduct of the stockholders. Name the corporation, its officers and directors and all known shareholders as parties. This type of suit is typically presented by a creditor who wants to disregard the corporate entity to collect a debt from the personal assets of stockholders. Hire an attorney to draft the petition, ideally.

 File the petition in state court. Use the state court system where the corporation has its principal offices or where it has filed its articles of incorporation. Submit the petition to the clerk of the court for scheduling. Pay the appropriate filing fee. Serve the court papers on all named parties. Follow the court's procedure for effective service of process in civil suits. Typically, you will have to deliver the petition by hand to named parties and mail a copy by registered mail. Present your case and await a judicial decision. The only way to collect money from the personal assets of directors and stockholders of a corporation is for a judge to find the corporate veil has been pierced and order the corporate entity to be disregarded. Take a judgment in your favor and use it to attach the assets of shareholders.