When can I pierce the corporate veil? Directors, corporate shareholders, and officers who defraud may individuals or business may have the corporate shield pierced and become personally liable. A Florida Court will look to three main things when deciding if the corporate veil should be pierced. 1. Was the corporation used as an alter ego (or mere instrument) used for the shareholders’ personal benefit? 2. Was the person seeking to pierce the veil damaged by the actors conduct? 3. Can the piercing party demonstrate improper conduct by the corporation? Plaintiffs will want to focus on any injustice or fraud that has been perpetrated by corporate actors. Courts will be more apt to pierce the corporate veil when fraud can be shown. Once the corporate veil is pierced, the actors become personally liable. Thus, both the corporation’s assets and corporate actor’s assets may be garnished, attached, and subject to judgment. A plaintiff must demonstrate adequate grounds to pierce the corporate veil by a “preponderance of the evidence.” Similarly, parent corporations cannot hide behind its subsidiaries when the subsidiary is a mere instrumentality of the parent corporation. Three common examples are: 1. Defrauding creditors out of money by creating subsidiaries to hold the contracts is the most common example of such fraud; 2. The parent company purposefully undercapitalizing a subsidiary; and/or 3. The parent company controlling its subsidiary where the subsidiary essentially has not “real” corporate interest but that of its parent. |
