Generally, a corporation will be looked upon as a separate legal entity, unless it is used to commit fraud or to achieve inequitable results.
Even if a corporation is properly formed, a court may disregard its separate entity and hold shareholders or affiliated corporations liable on corporate obligations.
Common ownership of the stock of two or more corporations, together with common management, will not alone render one corporation liable for the acts of the other corporation or its employees. However, liability may be imposed where:
- the representatives of one corporation actively and directly participate in and apparently exercise pervasive control over the activities of the other corporation; or
- there is an intermingling of activity of corporations engaged in a common enterprise, with substantial disregard of the separate nature of the corporate entities.
Inadequate capitalization alone will not ordinarily lead to disregard of the corporate entity if the corporate formalities are carefully observed.
If the corporate veil is pierced, liability is generally imposed only upon shareholders active in management. |
