Which instance alone may justify the court in piercing the veil of corporate fiction?

Prepare for your Partnership and Corporation Exam with engaging flashcards and multiple-choice questions. Each question comes with hints and detailed explanations. Boost your confidence and ace the exam!

The rationale behind the correct answer centers on the principle of piercing the corporate veil, which is a legal concept that allows courts to disregard a corporation's separate legal personality under certain circumstances, particularly when justice requires it. When the control of a corporation is utilized by a director to commit fraud, it indicates a misuse of the corporate form that often reflects an intent to deceive or harm others, which justifies the court's intervention.

In such cases, if it is shown that a director is using the corporation not as a legitimate business entity but as a tool for personal gain or to perpetrate fraud, the courts may determine that the individual should be held personally liable for the corporation's obligations and wrongdoing. This is essential to prevent individuals from hiding behind the corporate structure to escape accountability.

The other scenarios listed—such as ownership by a single stockholder, having sister companies, or interlocking directors—do not inherently involve the element of wrongdoing or intent to deceive, which diminishes their justification for piercing the veil. Thus, it is the fraudulent use of control by the director that is the critical factor in justifying such a judicial remedy.

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