ARCHIVED CONTENT
You are viewing ARCHIVED CONTENT released online between 1 April 2010 and 24 August 2018 or content that has been selectively archived and is no longer active. Content in this archive is NOT UPDATED, and links may not function.By David J. Willis
Litigation and Discovery Extract: During the discovery phase of a lawsuit involving a corporation or LLC, a plaintiff’s attorney will likely request production of the company book and all relevant company documentation. Purpose? If the company has no company book or documentation other than a Certificate of Filing, the plaintiff’s attorney may then amend his pleadings to include an allegation that the LLC is merely the alter ego of the individuals behind it, and therefore the liability shield should be pierced to hold members personally responsible for company wrongdoing. But what does “alter ego” mean? “Under the alter ego theory, courts disregard the corporate entity when there exists such unity between the corporation and individual that the corporation ceases to be separate and when holding only the corporation liable would promote injustice.” Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228 (Tex. 1990). In other words, the company failed in its mission to become and maintain itself as a legal entity independent of its owner. While Business Organizations Code section 21.223(a)(2) eliminates the alter-ego theory as a basis for veil piercing, it cannot be eliminated as a factor in a case where actual fraud is present, particularly since piercing in Texas has always been linked to values of fairness and justice.
Read the complete article at:Piercing the Corporate Veil of a Texas LLC or Corporation
