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The Illinois Appellate Court has recently broadened the potential individual liability for a corporation’s debts, even in cases where the individual is not an officer, director, employee, or shareholder of the corporation.
Corporations and LLCs are generally separate and distinct from their employees, officers, directors, and shareholders. Their purpose has been to insulate individuals from personal liability for the corporation’s debts and other liabilities. Historically, Illinois courts have been reluctant to “pierce the corporate veil” and hold individuals liable for corporate debts and other liabilities. However, that may be changing.
Illinois courts may pierce the veil where: (i) there is such a unity of interest and ownership that separate personalities of the corporation and the parties who compose it no longer exist, and (ii) circumstances such that the fiction of a separate corporation would promote injustice or inequitable circumstances.
Traditionally, courts would consider piercing the corporate veil only with respect to shareholders, officers, and directors of the corporation. However, recent caselaw suggests that the veil may now, under certain circumstances, be pierced against non-shareholders as well. Taking principles of equity into account, “the lack of shareholder status –and, indeed, lack of status as an officer director, or employee – does not preclude veil piercing”. See Buckley v. Abuzir, 2014 IL App (1st) 130469. This means that individuals may potentially be liable for corporate debts if they are in de facto control of the corporation despite not being a shareholder, officer, or director.
At Donnelly Law LLC, we are prepared to advise clients on the methods to limit personal liability for corporate liabilities as much as possible.
The information in this article is for informational purposes only and does not constitute formal, legal advice. Consult with an attorney from Donnelly Law LLC for advice about your circumstance.
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