Lifting of corporate veil in tort

Overview and Resources January 5, — November 27, R Constituent service encompasses a wide array of non-legislative activities undertaken by Members of Congress or congressional staff, and it is commonly considered a representational responsibility. Member offices vary in their priorities, activities, and scope of constituent service, but most offices try to assist with certain requests when possible.

USA March 2 Many entrepreneurs create business entities to operate their businesses, to facilitate commercial ventures, and to shield themselves from personal liability.

The business maintains a separate and distinct identity from that of its owners or related entities. However, the mere shell of a corporate structure is not always enough to avoid personal liability.

Before discussing the most important factors of veil piercing, it is important to understand what it means to pierce the corporate veil. Piercing the corporate veil is the legal jargon used to describe an action pursued against a company that ultimately leads to personal liability of the owners, shareholders, or members wherein the corporate structure is disregarded.

This personal liability opens owners, shareholders, or members bank accounts, real and personal property interests, and investments to risk.

Under Florida law, a party wishing to pierce the corporate veil must show that the corporation at issue is the mere instrumentality or alter ego of its shareholder s or its parent corporation, and that said shareholder or parent corporation engaged in improper conduct.

Courts in Florida have enumerated a number of factors that may lead to piercing the corporate veil. While there is no set equation for the number of factors that must be present to pierce the veil and in most cases there are three to five factors presentthere are particular factors that raise red flags more so than others.

A few worth noting are set forth as follows: The existence of fraud, wrongdoing, or injustice to third parties. Of all of the factors that courts look at, the existence of fraud, wrongdoing, or injustice is the biggest red flag when determining whether or not to pierce the corporate veil.

In a majority of cases, the claimant is seeking to pierce the corporate veil because of the wrongdoing of the company or its owners.

In this example, it is likely that ABC Corp. This is a classic example of a debtor attempting to defraud its creditor. As with any area of the law, it is never as clear cut as it seems and there are copious amounts of debtor defenses to the very serious allegations of fraud. In Broward Marine, Inc.

In that case, the plaintiff sued the defendant yacht corporation for foreclosure of its mortgage on a yacht. Through the proceeding supplementary, the plaintiff sought to hold the transferee-corporation, and the sole shareholder, liable for the underlying judgment against the yacht corporation.

Lifting of corporate veil in tort

Specifically, the Court found that the yacht corporation had transferred all of its assets, post-judgment, in order to hinder, delay, or defraud the Plaintiff.

Resultantly, the yacht corporation had its veil pierced and its sole shareholder and one of his other closely-held corporations were found liable for the underlying judgment. The takeaway here is to take an outsiders perspective on transactions and business decisions.

If it appears to be fraudulent or even just questionable, the company should consult legal counsel to guide it through its decision-making process.

Failure to maintain the separate identities of the companies. A familiar scene that may cause some scrutiny is where there are several related affiliates or multiple companies acting under the umbrella of one company and the failure to maintain separate identities of the companies.

The parent company operates and controls the subsidiary, provides all of the financing for the subsidiary, indicates the same officers, address, and corporate information, and files consolidated taxes with the subsidiary.

See the red flags? The subsidiary can likely be accused of being the alter ego of the parent company. Amongst the factors identified by the court, the court found that the following were indicia of a showing that the subsidiary was merely an instrumentality of the parent corporation: We know from case law that courts will carefully scrutinize the relationship of a parent corporation and its subsidiary.

Thus, for companies who set up a corporate scheme with a parent company and one or multiple subsidiaries, the officers should ensure that the business of the separate entities is kept separate — separate bank accounts, separate contracts, etc.

Failure to maintain separate identities of the company and its owners or shareholders. This factor is somewhat similar to number two listed above but instead of the intertwinement being with other companies, this is an intertwinement with the owners or shareholders of the company. Again, the business tip is to ensure distinctness in the company and the owners.

Owners, shareholders, and officers should avoid commingling funds and must treat assets of the business separate from personal assets.

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Failure to adequately capitalize the company. The issue of adequately capitalizing a company is never enough, in and of itself, to pierce the corporate veil by itself.

Practically speaking, business owners are not punished by the court system for not making enough money or running a business haphazardly. However, a commonality amongst cases is the undercapitalization of the business. The measure of assets is directly correlated to the business purpose so businesses are not all held to the same standard.

Owners cannot just open a business and use their personal account, with hopes of turning a profit and putting money back into the business. This behavior is too risky and jeopardizes your corporate liability shields.

Failure to follow corporate formalities The final red flag that could lead to piercing the corporate veil is the failure to follow corporate formalities.

Supreme Court issues guidance on "Piercing the corporate veil" - Publications - Allen & Overy

Again, business owners are not necessarily punished because they fail to observe every corporate formality. In cases where formalities are not properly followed, courts have held that the legal liability protection of the shareholders was effectively waived and the personal assets of the owners could be reached by the claimant.Corporate Veil The corporate veil is the liability shield that inherently attaches to the shareholders of a corporation.

In general, shareholders of a corporation are not personally liable for corporate debts or for torts committed by the corporation. Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders.

Lifting of corporate veil in tort

Usually a corporation is treated as a separate legal person, which is solely responsible for the debts it incurs and the sole beneficiary of the credit it . Piercing the corporate veil is the legal jargon used to describe an action pursued against a company that ultimately leads to personal liability of the owners, shareholders, or members wherein the corporate structure is disregarded.

company law lifting of corporate veil with reference to leading case shagun singh national university of research and study in law Student loan forgiveness and loan repayment programs provide borrowers a means of having all or part of their student loan debt forgiven or repaid in exchange for work or service in specific fields or professions or following a prolonged period during which their .

8Compare the observation by Angelo Capuano of MonashUniversity in his paper propounding a ‘realist’ approach to piercing the corporate veil, ‘The realist’s guide to piercing the corporate veil: Lessons from Hong Kong and Singapore’, () 23 Australian Journal of Corporate Law: ‘The corporate veil cannot be measured physically, nor can the corporation be touched, hand cuffed or.

Lifting The Corporate Veil - Corporate law