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Copyright (c) 1991 Cornell Law Review
Cornell Law Review

ARTICLE: PIERCING THE CORPORATE VEIL: AN EMPIRICAL STUDY.

July, 1991

76 Cornell L. Rev. 1036

Author

Robert B. Thompson [+]

Excerpt

I

INTRODUCTION

Piercing the corporate veil is the most litigated issue in corporate law 1 and yet it remains among the least understood. As a general principle, corporations are recognized as legal entities separate from their shareholders, officers, and directors. Corporate obligations remain the liability of the entity and not of the shareholders, directors, or officers who own and/or act for the entity. "Piercing the corporate veil" refers to the judicially imposed exception to this principle by which courts disregard the separateness of the corporation and hold a shareholder responsible for the corporation's action as if it were the shareholder's own. The boundaries of this exception are usually stated in broad terms that offer little guidance to judges or litigants in subsequent cases. In 1926, Benjamin Cardozo described this corner of the law as "enveloped in the mists of metaphor," 2 and courts and commentators have been even less kind in subsequent years. Legal writers have described judicial decisions to pierce the veil as "irreconcilable and not entirely comprehensible," 3 "defy[ing] any attempt at rational explanation," 4 and occurring "freakishly." 5

Much of the criticism, like Cardozo's comment, is directed more at the form and language of the decisions than at the results. A common refrain in the literature is an attack on the use of conclusory terms, such as "alter ego" and "instrumentality," 6 that provide no insight into the nature of the factors considered. Commentators lament that the same ...
 
 
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