Illinois Courts’ Requirements for Piercing the Corporate Veil
In Illinois, generally, the law regards a corporation as an entity separate and distinct from its officers, shareholders, and directors and therefore those parties will not be held personally liable for the corporation’s debts and obligations. Melko v. Dionisio, 219 Ill.App.3d 1048, 1063, 162 Ill.Dec. 623, 580 N.E.2d 586, 594 (1991). However, in certain circumstances, the corporate form may be disregarded, such as where the corporation is merely the alter ego or the business conduit of another dominating personality. See id.
In Illinois, piercing the corporate veil is a task which the courts should generally undertake reluctantly. Pederson v. Paragon Pool Enterprises, 214 Ill.App.3d 815, 819, 158 Ill.Dec. 371, 574 N.E.2d 165, 167 (1991). The Courts should not interfere with the corporate form anymore than it would a private contract, and the corporate veil should only be pierced when it appears that something in the particular situation has “gone amiss.” Tower Investors, LLC v. 111 East Chestnut Consultants, Inc, 371 Ill.App.3d 1019, 864 N.E.2d 927, 309 Ill.Dec. 686. Particularly, in breach of contract cases, courts should apply even more stringent standards to determine when to pierce the corporate veil than they would in tort cases. See id.
Illinois Courts may pierce the corporate veil if the two following requirements are satisfied. First, if there is such a unity of interest and ownership that the separate personalities of the corporation and the parties who compose it no longer exist. Second, if the circumstances are such that adherence to the fiction of a separate corporation would promote injustice or inequitable circumstances. Pederson v. Paragon Pool Enterprises, 214 Ill.App.3d 815, 819, 158 Ill.Dec. 371, 574 N.E.2d 165, 167 (1991). In a breach of contract case, “additional compelling facts,’ “such as a finding of fraud, may also be required. Main Bank of Chicago v. Baker, 86 Ill.2d at 205-06, 56 Ill.Dec. 14, 427 N.E.2d at 101-02 (1981). Where there is no evidence of any misrepresentation, no attempt to conceal any facts, and the parties possess a total understanding of all of the transactions involved, Illinois courts will not pierce the corporate veil in a breach of contract situation. See id.
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About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a business litigation firm. Litigators Walid J. Tamari and Grant Blumenthal practice in the law firm's complex litigation practice group.
