By Mike Appleton, Guest Blogger
Lawyers who do commercial litigation are familiar with the concept known as “piercing the corporate veil.” A principal purpose for doing business in corporate form is to avoid personal liability for business debts. But the veil of protection afforded by the corporate entity can be lost under certain circumstances, exposing a controlling shareholder to personal liability. Although the application of the concept varies a bit from state to state, the general rule is that “courts will look through the screen of a corporate entity to the individuals who compose it in cases in which the corporation was a mere device or sham to accomplish some ulterior purpose, or is a mere instrumentality or agent of another corporation or individual owning all or most of its stock, or where the purpose is to evade some statute or to accomplish some fraud or illegal purpose.” Biscayne Realty & Insurance Co. v. Ostend Realty Co., 109 Fla. 1, 148 So. 460, 564 (1933).
In short, no majority shareholder would concede that his company is his alter ego. Right? Well, maybe not. Recently some shareholders have been arguing, and successfully, that their companies are indeed mere instrumentalities.
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