Piercing the corporate veil: the analysisLevantar el velo corporativo: el análisis
Default rule, two contexts, two sets of factors, the Texas statute, and the best practices that keep owners safe, following chapter 4.Regla general, dos contextos, dos grupos de factores, la ley texana y las buenas prácticas que protegen a los dueños, según el capítulo 4.
- Start from limited liabilityParte de la responsabilidad limitada: Owners of a corporation or LLC risk only their investment. Exceptions that are not veil piercing: a personal guaranty, and an owner's own tort (the tortfeasor always answers personally).
- Name the contextNombra el contexto: Closely held company whose active owners the creditor wants to reach, or parent and subsidiary (or sister companies) run as one. Dispersed shareholders of public companies are in practice never reached.
- Tort or contract creditor?¿Acreedor de tort o contractual?: Contract creditors chose the counterparty and could have protected themselves; tort creditors did not. Courts pierce more readily for tort victims, and in Texas contract claims need actual fraud. (TBOC § 21.223(b))
- First set of factors: loss of separate identityPrimer grupo de factores: pérdida de identidad separada: Formalities ignored (not a factor in Texas), no separate accounts, one company paying another's bills, shared employees nobody can assign, undocumented money moving between owner and company. Commingling is the heaviest fact. (TBOC § 21.223(a)(3))
- Second set of factors: an equitable reasonSegundo grupo de factores: una razón de equidad: Fraud (phony financials), misrepresentation (letting the creditor think it dealt with the parent), undercapitalization (assets or insurance trivial against foreseeable claims), siphoning funds through excessive salaries or dividends. Domination alone is usually not enough.
- Apply the Texas statuteAplica la ley de Texas: For obligations arising from contract, the plaintiff must show actual fraud primarily for the owner's direct personal benefit; alter ego and sham-to-perpetrate-a-fraud theories are channeled through the statute; the same rules reach LLC members. (TBOC §§ 21.223–21.224, 101.002)Castleberry's looser common-law test was overruled by statute for contract claims; cite it for history, not for the rule.
- Single business enterpriseEmpresa única: When affiliated companies pool resources for one business purpose, some courts make each liable for the others' debts. Texas rejects the theory as an independent basis for liability; you still need the piercing factors. (SSP Partners v. Gladstrong Investments (Tex. 2008))
- Best practices (the advice question)Buenas prácticas (la pregunta de asesoría): Separate bank accounts, no commingling, documented transactions and resolutions, adequate capital and insurance for the risk, sign only in the entity's name, never mislead creditors about who they deal with.
- Conclude with a prediction and the facts that would flip itConcluye con una predicción y los hechos que la cambiarían: Weigh the factors as a whole; more factors, stronger case. Say which fact (insurance, a guaranty, a clean bank account) would change the outcome.
Two questions the professor likes to ask
Should it be easier to pierce for tort creditors? (Most courts say yes in practice, and the policy reason is choice.) Should it be easier in the parent-subsidiary setting than against individuals? (The analysis is nominally the same, but studies suggest individuals get pierced more often than corporate parents.)
Mexican contrast
Mexican law has only timid versions of this (desestimación de la personalidad jurídica, mostly in tax and labor matters). The reflex of a Mexican lawyer is to say the shareholders never answer; the American reflex is to list the factors and weigh them.