Piercing The Corporate Veil: A Paradigm In Rhyme Poem by Jonathan Zuckerman

Gather ‘round me, friends and scholars,
Hang on tightly to your collars
My lecture task is to explain
I’ll also try to entertain
The topic that I will assail
Is Piercing of the corporate veil

The Corporation is a distinct entity
Shielding stockholders from Liability
So if, on a note Disney Inc would default
You cannot bill old Uncle Walt
Shareholder isn’t liable for the debts of corporation
And that is the cause of its celebration
But a limit to this privilege, there must be,
All in the name of equity!
For to abuse the corporate form
Fraudulently is altogether wrong
The Court is mostly reluctant to act
Sometimes it will and that’s a fact

The Corporation is a fictional person;
A well settled principle; that is a terse one
But in a case know as Van Dorne
A test for an equitable remedy is born
To pierce on through the corporate veil
A two pronged test you cannot fail
The first prong of this two pronged test
Is Unity of in-ter-est

When ownership is found to be
Such that the separate personalities
Of corporation and shareholder
Are indistinct and just a blur

Prong number one is then passed;
The court investigates at last
If honoring a separate corporate existence, thus
Would sanction fraud or promote injustice

The court will examine many factors
Is the corporation is controlled by other actors?
As to justify the disregard of separate identities
Such as failure to comply with Corporate Formalities
Commingling of funds, what could be worse?
Than treating your corporation as if it was your purse?
Undercapitalization for the type of trade
Or siphoning, it’s a sort of charade
One corporation treating the assets of another as its own
Assets that the corporation should leave alone

A third prong that the court will apply
Is if a reasonable party may rely
On whether there is adequate capitalization
Without some kind of investigation;
The party would assume the risk of loss,
And that wouldn’t make for a happy boss!

So if you are prepared and don’t quiver and quail;
You too, may pierce the corporate veil!