Alter Ego | The R. Shawn McBride Law Firm, PLLC

Tagged Posts: alter ego’

LLC Law Update: Piercing the Corporate Veil (Post 6)

March 1, 2016

We have looked at the laws governing veil piercing in New York, Wyoming, Texas, and Maryland. Veil piercing is available in most other states in varying degrees, but it bears repeating that limited liability is the rule and piercing is the rare exception to be applied only in cases involving exceptional circumstances.[1] The cases we discussed here are merely a snapshot of veil piercing laws in different states and examples of situations where courts allowed veil piercing, not necessarily indicative of that particular state’s business-friendliness, as veil piercing is highly fact-intensive. … Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 5)

February 25, 2016

Maryland.

In recent years, Maryland has become one of the most difficult states in which to pierce the corporate veil, with a success rate at about 25.81%.[1] This is an interesting reversal, given that the state had a relatively liberal 40% rate until 1986.[2] Under Maryland law, where there is no allegation of fraud, a court may still disregard the corporate entity and establish personal liability to enforce the so-called a “paramount equity,”[3] but this seems to be a pretty tough standard to meet.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 4)

February 18, 2016

Texas.

In Texas, veil piercing is in large part governed by the statute. Specifically, a shareholder is not liable to the corporation or its creditors with respect to, among other things, contractual obligations of the corporation on the basis that the shareholder was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory.[1] As in Wyoming, a shareholder is also not liable for the corporation’s failure to observe any corporate formality, including the failure to comply with the statute or the certificate of formation or bylaws of the corporation.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 3)

February 11, 2016

Wyoming.

Wyoming courts allow veil piercing in about 61.90% of cases, far exceeding the national average, though the small size of the dataset (21) makes it difficult to say that the rate is statistically meaningful.[1] In Wyoming, veil piercing law was also modified by statute around the time this number came out, so that failure of an LLC to observe any particular corporate formalities is no longer a ground for imposing liability on the members or managers for the liabilities of the company.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 2)

February 4, 2016

New York.

According to a 2010 study of a dataset of 2908 cases from 1658 to 2006, New York courts allow veil piercing in about 49.81% of cases and is among the most prominent producers of veil piercing cases.[1]

In Agai v. Diontech Consulting, Inc.,[2] a recent case, a creditor sought to pierce the veil of a corporation, arguing that the principals operated the consulting business without corporate formalities for their own unjust enrichment and to avoid the judgments obtained by the creditor. … Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 1)

February 2, 2016

In our previous blog series comparing limited liability company (LLC) statutes, we briefly mentioned that there are situations where courts “pierce the corporate veil” so as to hold LLC members liable for business debts. We also mentioned that veil piercing requires a highly fact-intensive analysis and that the law varies widely from state to state. Courts have applied or declined to apply this remedy in a manner that has often been confusing and inconsistent, as two luminaries of the legal world observed over a score of years ago: “Piercing seems to happen freakishly. … Read the rest