Veil piercing

Question 1

Veil piercing general rule

Answer 1

Shareholders are NOT personally liable for corporate debts, but only amount invested into corp EXCEPT: when court pierces limited liability due to FRAUD or UNFAIRNESS

Question 2

When will court pierce veil? 3 factors

Answer 2

1) alter ego
2) undercapitalization
3) fraud

Question 3

Tort v. K: when are courts more likely to pierce veil?

Answer 3

More likely for TORTS than contracts

Question 4

Are courts more likely to pierce veil in small or large corps?

Answer 4

SMALL, closely held more likely to pierce veil

Question 5

Alter ego

Answer 5

When investor/shareholder has failed to observe any corporate formalities between person and corporation (eg. intermingling funds or not holding separate meetings)

Question 6

Undercapitalization

Answer 6

Failure to maintain funds sufficient to cover foreseeable liabilities

Question 7

Rule on piercing veil

Answer 7

Corporations enjoy limited liability, but there may be circumstances in which court is willing to pierce veil to get assets from shareholders