Piercing the Corporate Veil

The Court of Appeals just handed down a new decision that addresses the circumstances under which one may pierce the corporate veil. The case is Boyles v. National Development Company; read the opinon here.

The court affirmed the imputation of liability through the corporation to the person who set it up and ran it. In doing so, the Court re-afffirmed the application of the Allen test. The Allen test says this:

“Factors to be considered in determining whether to disregard the corporate veil include not only whether the entity has been used to work a fraud or injustice in contravention of public policy, but also: (1) whether there was a failure to collect paid in capital; (2) whether the corporation was grossly undercapitalized; (3) the nonissuance of stock certificates; (4) the sole ownership of stock by one individual; (5) the use of the same office or business location; (6) the employment of the same employees or attorneys; (7) the use of the corporation as an instrumentality or business conduit for an individual or another corporation; (8) the diversion of corporate assets by or to a stockholder or other entity to the detriment of creditors, or the manipulation of assets and liabilities in another; (9) the use of the corporation as a subterfuge in illegal transactions; (10) the formation and use of the corporation to transfer to it the existing liability of another person or entity; and (11) the failure to maintain arms length relationships among related entities.”

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