Creighton Law Review Full Issue - Volume 51 Number 2
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INTRODUCTION|The "fiction" of the modern limited liability entity was primarily meant to benefit shareholders at the expense of creditors. Shareholders safely invest their capital in the business entity without concern for the investment's effect on their personal assets. Nonshareholding directors, officers, and agents are shielded from personal liability by normal principles of agency law. But for the typical close corporation, management and risk bearing is more closely connected. Consequently, in their dual roles as manager and owner, shareholders of closed corporations have greater incentive to undertake overly risky projects.|The overwhelming majority of Nebraska businesses are small, closely-held operations. As of 2017, approximately 99.1% of Nebraska businesses were considered small with 47.1% of all Nebraska employees employed by such businesses. These figures appear fairly consistent throughout the country. Because of the extent of the closely-held business presence in our economy, it should come as no surprise that the doctrine of piercing the corporate veil is litigated more than any other issue in corporate law.|Piercing the corporate veil is an equitable remedy that allows creditors to circumvent the corporate fiction to reach the assets of its owners. The remedy has been long criticized as being conclusory, vacuous, vague, and shrouded in misperception and confusion. The oftcited Judge Cardozo once characterized the remedy as being "enveloped in the mists of metaphor" and noted that "logical consistency" is sacrificed "when the sacrifice is essential to the end that some accepted public policy may be defended or upheld"...
Creighton University School of Law