Shared Facilities: The subsidiary and the parent share the same facilities, address, and telephone numbers.Business Discretion: The subsidiary displays very little business discretion.Common Management: The same directors and officers control both the parent and subsidiary.3d DCA 1995) (citations omitted).Īdditionally, for veil piercing cases that involve parent-subsidiary relationships, Florida courts also consider the following factors: Commingling of corporate and personal affairs (e.g., funds put in and taken out of the corporation for personal rather than corporate purposes).Failure to follow corporate formalities (e.g., failure to issue stock, elect a board of directors, and keep corporate records).Domination by a single or few shareholder(s) (i.e., a wholly-owned subsidiary or a corporation with one or two individual shareholders).Specifically, for the alter ego/mere instrumentality element, Florida courts consistently utilize the following factors: Regardless of the theory, Florida courts have identified several factors to aid in their veil piercing analysis. Under the mere instrumentality theory, the plaintiff must establish that the parent corporation’s control is to such a degree that the subsidiary is a mere instrumentality of the parent. 2d at 1184.Īlternatively, the “mere instrumentality” theory may be used to pierce the corporate veil of a subsidiary corporation to reach the parent corporation’s assets.
Stated differently, individual liability under the alter ego theory is imposed where “the personal affairs of the shareholder become confused with the business affairs of the corporation.” Solomon, 550 So. Under the “alter ego” theory, the plaintiff must establish that “the shareholder dominated and controlled the corporation to such an extent that the corporation’s independent existence, was in fact non-existent and the shareholders were in fact alter egos of the corporation.” Gasparini v. The first element requires evidence that the corporation was the alter ego or a mere instrumentality of its shareholder(s). Prong One: Alter Ego/Mere Instrumentality Specifically, piercing the corporate veil requires the plaintiff prove: (1) a lack of separateness between the corporation and its shareholder(s) (2) improper conduct in the use of the corporation by the shareholder(s) and (3) that the improper conduct was the proximate cause of the alleged loss. Notwithstanding the procedural aspects of the doctrine, Florida courts require the plaintiff establish three elements to pierce a corporation’s veil. Accordingly, a plaintiff cannot attempt to pierce a corporation’s veil unless the corporation itself is found liable and the judgment against the corporation is unsatisfied.
Piercing the veil of limited liability is an equitable doctrine that is not, by itself, a cause of action. This blog post discusses the essential elements of corporate veil piercing in Florida and the common factors Florida courts utilize. However, piercing the corporate veil is easier said than done. In other words, the court will pierce the corporation’s veil of limited liability. As a result, courts will occasionally disregard a corporation’s limited liability protection by holding the individual shareholders liable to the corporation’s creditors. Unfortunately, some individuals may abuse the corporate form’s limited liability status by using it to mislead or defraud creditors.
Part I: What Documents Matter Most In Determining Share Value in a Buyout? An Analysis of Key Documents and Why They Matter.Part II: What Documents Matter Most In Determining Share Value in a Buyout? An Analysis of Key Documents and Why They Matter.Part III: What Documents Matter Most In Determining Share Value in a Buyout? An Analysis of Key Documents and Why They Matter.Other Articles in Professional Services Industry Legal Blog If you are interested in speaking to a Jimerson Birr lawyer or want general information about the firm, our practice areas, lawyers, publications, or events, please contact us via email or telephone for assistance at (904) 389-0050. Jimerson Birr welcomes inquiries from the media and do our best to respond to deadlines. Real Estate Development, Sales & Leasing.Community Advocacy & Social Responsibility.Search Website Submit SearchSearch Close Search