Corporations: Third Parties

Question 1

Piercing the Corporate Veil Doctrine

Answer 1

A shareholder of a corporation is not personally liable for the acts or debts of the corporation EXCEPT that he may become personally liable by reason of his OWN ACTS OR CONDUCT

Question 2

Van Dorn Test for PCV

Answer 2

A court will hold a shareholder of a corporation personally liable if:

(1) there is a UNITY OF INTEREST such that the separate personalities of the corporation and the individual no longer exist.
(i) Lack of corporate formalities
(ii) Commingling of funds and assets
(iii) Severe under-capitalization
(iv) Treating corporate assets as one’s own

(2) Refusing to allow PCV would:
(i) sanction fraud or
(ii) promote injustice