When a corporation is used as a shield for liability or for an illegitimate business purpose, courts will exercise their equitable power in applying the "equally fundamental principle" of piercing the corporate veil. Piercing the corporate veil allows one to puncture the "veil" of limited liability in order to hold a shareholder liable for the corporation's conduct. Because of the competing interests that reverse piercing implicates, this note proposes that the doctrine be permitted against both legal and equitable owners, but only when traditional, less intrusive remedies are insufficient. Part I discusses both traditional and outside reverse veil piercing. Part II discusses the arguments for and against the various methods of outside reverse piercing through a case law analysis. Finally, Part III advances a solution that safeguards the interests of all involved parties by first identifying the shortcomings of more traditional remedies and then proposing a new approach.
REVERSE PIERCING OF THE CORPORATE VEIL: A STRAIGHTFORWARD PATH TO JUSTICE NICHOLAS B. ALLEN† INTRODUCTION It is textbook law that a stockholder’s exercise of control over a corporation does not create liability beyond the assets of that corporation.1 This concept of limited liability for corporations is “deeply ingrained” in both American legal and economic systems.2 Indeed, judicial acknowledgement of a corporation as a separate and distinct entity is a cornerstone of American enterprise, and benefits such as encouraging shareholder investment by limiting investor risk exposure are essential.3 However, limited liability has its limits. When a corporation is used as a shield for liability or for an illegitimate business purpose, courts will exercise their equitable power in applying the “equally fundamental principle” of piercing the corporate veil.4 Piercing the corporate veil allows one to puncture the “veil” of limited liability in order to hold a shareholder liable for the corporation’s conduct.5
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