Is LLC Veil Piercing Really “Not Required By Statute”?

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Professor Stephen Bainbridge begins his abstract Abolishing LLC Veil Piercing with the following assertion:

Courts are now routinely applying the corporate law doctrine of veil piercing to limited liability companies.  This extension of a seriously flawed doctrine into a new arena is not required by statute and is insupportable as a matter of policy.

But is veil piercing really “not required by statute”?  Reading further in the article, Professor Bainbridge acknowledges in a footnote that several states, including California, have “statutes that ‘specify that corporate law principles should be used to pierce the veil generally’”.  The Beverly-Killea Limited Liability Company Act did include a provision subjecting members of a LLC to the common law governing alter ego liability.  Former Cal. Corp. Code §17101(b).  I participated in drafting the original Beverly-Killea Act and this provision was included at the insistence of the legislature.  The newly effective California Revised Uniform Limited Liability Company Act continues to subject members to the common law governing alter ego.  Cal. Corp. Code § 17703.04(b).

These statutes are bizarre in their own right.  In California, alter ego is an equitable, not common law, doctrine.  Brown Bark III, L.P. v. Haver, 219 Cal. App. 4th 809, 823 (2013).

 

Topics:  Corporate Veil, LLC, Statutory Interpretation

Published In: Business Organization Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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