Philadelphia Business Lawyers: Piercing the Corporate Veil

In Pennsylvania, a corporation is considered a distinct entity from its shareholders.  Under certain circumstances a court will pierce the corporate veil of a corporation and hold the shareholders personally liable for the corporation’s debts.  A strong presumption against piercing the corporate veil exists in Pennsylvania. However, in limited circumstances the court will allow it.

In Lumax Industries, Inc. v. Aultman, the Pennsylvania Supreme Court articulated factors to consider when determining whether to pierce the corporate veil.  The court should consider whether the corporation is undercapitalized, whether it adheres to the corporate formalities or not, whether substantial commingling of corporate and personal affairs is occurring, and whether the corporation is being used to commit a fraud.  In such circumstances the court may, as a matter of equity, pierce the corporate veil and hold the corporation’s shareholders personally liable for the corporate debt at issue.  However, the party seeking to have the corporate veil pierced has the burden of proving, by clear and convincing evidence, that the veil should be pierced.

For more information, call Philadelphia business lawyers at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.