•  
  •  
 

Florida Atlantic University Undergraduate Law Journal

Advisor

Anita Blowers

College

Business

Keywords

Veil Piercing, Limited Liability, LLC, Corporate Formalities, Tort Liability, Creditor Protection, Corporate Façade, Shareholder Liability, Alter Ego, Corporate Misconduct, Undercapitalization, Economic Growth, Jury Discretion, Corporate Separation, Fraud Doctrine, Foreseeable Risk, Statutory Capitalization, Capital Requirements, Free Market, Contractual Claims, Tort Claims, Corporate Accountability, Legal Precedent, Corporate Governance, Liability Shield, Risk Allocation, Creditor Compensation, Judicial Inconsistency, Corporate Law, Piercing Standards, Business Liability

Document Type

Article

Abstract

The tension between promoting economic growth and ensuring proper corporate formalities lies at the very core of veil-piercing. When assets are not available to be seized in a possible suit, limited liability leaves tort victims and creditors without compensation. This lack of compensation reveals the gaps of precedent in limited liability and the protection of actors committing wrongdoing behind the façade of a corporate name.1 A clear baseline statutory capitalization requirement is needed to ensure creditors’ confidence. The extent to which piercing the veil is applied, and its testing, is examined for tort and contractual cases. This article examines the key precedents set by the cases considering the separation between shareholders and corporations. Their rulings determine what constitutes alter ego, promotion of injustice, fraud, and undercapitalization, which are all used to determine when to pierce the corporate veil. The inconsistencies and dependency on jury discretion reveal the need for a baseline set of capitalization requirements, determined by foreseeable risk. The implications for the economy are discussed for the barrier of entry that a blanket baseline would set for a free market economy.

Download

Share

COinS