Reconciling corporate structure with justice: a comparative study of PCV in the US and Saudi legal frameworks

This study conducts a comparative legal analysis on the doctrine of piercing the corporate veil (PCV) in the USA and the Kingdom of Saudi Arabia and addresses the way in which two drastically dissimilar legal systems, common law and Sharia-based jurisprudence, respectively, handle the balance between shareholder protection and corporate accountability. Courts in the USA use existing doctrines, like alter ego, instrumentality, and reverse piercing, to prevent abuse of the corporate form. On the contrary, Saudi Arabia’s approach is based on Islamic commercial ethics, and the Saudi Companies Law (2022) focuses on fairness, moral conduct, and adjudication discretion. This article takes the form of a doctrinal review of case law, statutory provisions, and Islamic legal principles and finds broad divergences in the methods by which courts arrive at their conclusions: US courts tend to begin with decisions and apply rule-driven tests, whereas Saudi courts look for concepts like ʿadl (justice), gharar (deception), and maslahah (public interest) to justify corporate disregard. While both jurisdictions provide PCV as a remedy for fraud and misuse, the lack of codified criteria in Saudi Arabia leads to legal uncertainty compared with the structured (albeit sometimes prismatic) framework used by American courts. But the findings are also more widely relevant to corporate governance in hybrid legal systems. The application of PCV standards could be codified by Saudi Arabia without any loss of its ethical foundations and would lead to increases in legal certainty. On the other hand, there are limitations in the formal doctrines of the US framework, which could be fortified by accessing Sharia’s focus on moral responsibility and equitable intent. This research advances ongoing debates in comparative corporate law and thus holds significance for business, regulatory, and policy actors in the area of cross-border activities.