Protect Your Corporation's Rights In Alter Ego Litigation

When a person or organization attempts to recover money from a corporation, either through a personal injury lawsuit or through another type of tort, it is a common tactic to attempt to "pierce the corporate veil" and attack shareholders, directors and officers directly.

Under normal circumstances, corporations are treated as separate entities from their stockholders, ensuring that stockholders are protected from any liabilities that the company may incur during the course of operation. If a court finds that a company's shareholders have been using their status as a corporation improperly, however, the judge may remove this protection and allow interested parties to collect compensation from shareholders directly. One way to accomplish this is to establish alter ego liability.

Alter ego litigation is a highly complex area of business law that Faricy Law Firm, P.A., navigates successfully and efficiently. We offer free initial consultations to discuss your specific concerns. Call our attorneys locally at 612.371.4400, or email us to arrange yours.

What Is Alter Ego Liability?

A corporation is intended to operate separately from any other entity, and to manage its affairs independently. However, in some cases shareholders and directors attempt to use their corporation as a tool to conduct their own personal business, counting on the corporation's liability immunity to protect them from any negative consequences. In these situations, the corporation would be considered the shareholder's alter ego; if the corporation incurs liabilities, such as an unfavorable personal injury ruling, a court could hold the shareholder personally responsible.

Alter ego liability may also apply when a parent company uses a subsidiary company to conduct wrongful acts. If the parent company exerts an undue amount of control over the subsidiary, a judge may "pierce the corporate veil" and hold the parent company liable.

Unfortunately, those pursuing claims against a company frequently attempt to establish alter ego liability against legitimate companies in the hopes of securing greater compensation. Defending against these accusations can be a challenging task; if your company is facing alter ego liability, it is important that you seek out an experienced legal advocate to represent your interests.

Common Legal Strategies Used To Establish Alter Ego Liability

There are several common strategies that claimants attempt to establish to prove alter ego liability:

  • Undercapitalization by not raising enough money to support its operations, thereby supporting a claim for shareholder liability
  • Commingling assets with another company's assets, including the assets of a parent company
  • Failing to maintain corporate formalities in an attempt to discredit an organization — for example, your corporation failed to take minutes at a board meeting

At Faricy Law Firm, P.A., we have a deep understanding of each of these legal strategies, and we understand how to defend against them. We have worked on behalf of corporations across the country, providing effective, cost-efficient representation for both large and small businesses.