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Piercing the corporate veil is an equitable theory in which the facts of each case are important. There are at least three corporate settings, two involving groups of related corporations, in which a plaintiff may invoke the doctrine (these are listed below)

  • 1) Personal shareholder liability - the most common setting for piercing the corporate veil invovles a plaintiff who rpevails in a lawsuit but finds the defendant's corporate assets potentially insufficient to satisfy the judgment. In this case, the plaintiff seeks to pierce the veil, reaching the pockets of individual shareholders
  • 2) Parent-subsidiary setting - it is concievable that a plaintiff could face piercing the veil twice, first reaching from subsidiary to parent corporation and second, reaching from parent corporation to grandparent corporation or individual shareholders.
  • 3) Brother-sister (sibling) corporation settings


In almost every case in which the veil is pierced, the court has found the presence of two or more the following factors. For instance, in Sea-land Services inc. v. Pepper Source, the court read Illinois law as directing a judge to focus on four factors:

Kinney Shoe Corp. v. Polan found that the state law required the presence of two factors

  • In the case of more sophisticated contract creditors, the court would impose a "third prong." Where under the circumstances, it woudl be reasonable for that type of party entering into the contract with the corporation, for example, a bank or other lending institutuion, to conduct an ....

Instrumentality theory

evasion of a contract or statute or use of a corporation solely to work a fraud

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