Posted On: March 1, 2011 by Steven D. Silverman

Piercing the Corporate Veil

Often in negligence matters against a corporation, the corporation does not have adequate insurance coverage to pay for the injured person's medical expenses and damages. In these instances when the corporation does not have assets, a diligent plaintiff's lawyer will go after the principal(s) of the corporation. This is known in legal terms as "Piercing the Corporate Veil".

“Maryland law is crystalline ‘that the corporate entity will be disregarded only when necessary to prevent fraud or to enforce a paramount equity.’”
• The mere fact that all or almost all of the corporate stock is owned by one individual or a few individuals will not afford sufficient grounds for disregarding corporateness

If substantial ownership of the stock of a corporation in a single individual is combined with other factors which support disregarding the corporation on grounds of fundamental equity, a court may pierce the corporate veil. Factors weighed in an analysis to determine whether a corporation is the ‘alter ego’ or instrumentality of the individual stockholder are:
•Whether the corporation was grossly undercapitalized
•Corporation’s failure to observe corporate formalities
•Non-payment of dividends
• Corporation’s insolvency
• Dominant stockholder’s siphoning of corporate funds
• Nonfunctioning of officers or directors
• Absence of corporate records
• Corporation’s status as a façade for the stockholders’ operations

For more information, please contact the maryland personal injury and accident lawyers at STSW.

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