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General Assembly Substitute Bill No. 7340
January Session, 2019
AN ACT CONCERNING TH E USE OF VEIL PIERCING TO DETERMINE
THE PERSONAL RESPONSIBILITY OF AN INTEREST HOLDER OF A
DOMESTIC ENTITY FOR THE DEBTS, OBLIGATIONS OR OTHER
LIABILITIES OF SUCH ENTITY AND THE RESPO NSIBILITY OF A
DOMESTIC ENTITY FOR THE DEBTS, OBLIGATIONS OR OTHER
LIABILITIES OF AN INTEREST HOLDER OF SUC H ENTITY.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective from passage and applicable to any civil 1
action filed on or after the effective date of this section) As used in this 2
section and sections 2 and 3 of this act: 3
(1) "Affiliate" means with respect to any specified person, any other 4
person directly or indirectly controlling, controlled by or under 5
common control with such specified person. As used in this 6
subdivision, "control" has the same meaning given to that term in 17 7
CFR 240.12b-2, as amended from time to time; 8
(2) "Domestic entity" means an entity whose internal affairs are 9
governed by the law of this state; 10
(3) "Entity" means (A) a business corporation, (B) a nonstock 11
corporation, (C) a limited liability partnership, (D) a limited 12
partnership, including a limited liability limited partnership, (E) a 13
limited liability company, or (F) any other person that (i) has a separate 14
legal existence, and (ii) is subject to a provision of the general statutes 15 Substitute Bill No. 7340
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which provides that an interest holder of such person is not personally 16
liable for a debt, obligation or other liability of such person solely by 17
reason of being or acting as such interest holder; 18
(4) "Governance interest" has the same meaning as provided in 19
section 34-600 of the general statutes; 20
(5) "Governor" has the same meaning as provided in section 34-600 21
of the general statutes; 22
(6) "Interest" means (A) a governance interest in an entity, (B) a 23
transferable interest in an entity, or (C) a share, membership interest or 24
other ownership interest in an entity; 25
(7) "Interest holder" has the same meaning as provided in section 34-26
600 of the general statutes; 27
(8) "Person" has the same meaning as provided in section 34-600 of 28
the general statutes; and 29
(9) "Transferable interest" has the same meaning as provided in 30
section 34-600 of the general statutes. 31
Sec. 2. (NEW) (Effective from passage and applicable to any civil action 32
filed on or after the effective date of this section) (a) A statutory limitation 33
on the liability of an interest holder of a domestic entity for a debt, 34
obligation or other liability of such domestic entity, including without 35
limitation, the limitation set forth in section 33-673 or 34-251a of the 36
general statutes, may not be disregarded based upon a veil piercing 37
doctrine, claim or remedy in connection with a transaction to which 38
the entity is a party, unless a court finds by clear and convincing 39
evidence that: (1) The interest holder exerted complete domination and 40
control over the management, finances, policies and activities of such 41
entity with respect to such transaction; (2) such domination and 42
control was used by the interest holder to (A) commit fraud or other 43
intentional wrong against the person asserting such doctrine, claim or 44
remedy, (B) intentionally violate a statutory or common law duty to 45 Substitute Bill No. 7340
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such person, or (C) commit a deceitful or other unlawful act against 46
such person; and (3) the domination and control exerted by the interest 47
holder and the breach of duty or other act proximately caused injury or 48
loss to the person asserting such doctrine, claim or remedy. 49
(b) In making a determination under subdivision (1) of subsection 50
(a) of this section, a court shall consider factors that include, but are not 51
limited to, whether: (1) The entity was adequately capitalized, (2) 52
assets of the entity were distributed or otherwise transferred from the 53
entity to the interest holder or any affiliate of such interest holder 54
without any lawful business purpose, (3) there were overlapping 55
interest holders, governors or other management personnel between 56
the entity and the interest holder or any affiliate of such interest 57
holder, (4) the interest holder or any affiliate of such interest holder 58
shared office spaces, addresses and telephone numbers with the entity 59
without payment of fair consideration, (5) transactions involving the 60
entity and the interest holder or any affiliate of such interest holder 61
were at arm's length and for fair consideration, (6) funds of the entity 62
were commingled with funds of the interest holder or any affiliate of 63
such interest holder, (7) the entity was treated as a separate legal entity 64
for financial and other business purposes as evidenced by having its 65
own contractual relationships, bank accounts, books of account and 66
financial statements, (8) the entity was insolvent or rendered insolvent 67
by the acts of the interest holder or any affiliate of such interest holder, 68
and (9) the property of the entity was used by the interest holder or 69
any affiliate of such interest holder without payment of fair 70
consideration. 71
(c) The burden of proof shall be on the person seeking to hold the 72
interest holder of a domestic entity responsible for the debts, 73
obligations or other liabilities of such entity. 74
(d) The failure of a domestic entity to observe formalities relating to 75
the exercise of its powers or the management of its activities and 76
affairs is not grounds for imposing personal liability on an interest 77
holder of such entity for a debt, obligation or other liability of such 78 Substitute Bill No. 7340
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entity based upon a veil piercing doctrine, claim or remedy. 79
(e) When determining whether a statutory limitation on the liability 80
of an interest holder of a domestic entity for a debt, obligation or other 81
liability of such domestic entity, including without limitation, the 82
limitation set forth in section 33-673 or 34-251a of the general statutes, 83
may be disregarded based upon on a veil piercing doctrine, claim or 84
remedy, a court shall make such determination exclusively in 85
accordance with the provisions of this section and section 1 of this act. 86
Sec. 3. (NEW) (Effective from passage and applicable to any civil action 87
filed on or after the effective date of this section) No domestic entity shall be 88
responsible for a debt, obligation or other liability of an interest holder 89
of such entity based upon a reverse veil piercing doctrine, claim or 90
remedy. 91
This act shall take effect as follows and shall amend the following
sections:
Section 1 from passage and
applicable to any civil
action filed on or after the
effective date of this section
New section
Sec. 2 from passage and
applicable to any civil
action filed on or after the
effective date of this section
New section
Sec. 3 from passage and
applicable to any civil
action filed on or after the
effective date of this section
New section
Statement of Legislative Commissioners:
In Section 1, the definition of "control" was included in Subdivision (1)
and the remaining subdivisions were renumbered accordingly for
consistency with standard drafting conventions.
JUD Joint Favorable Subst.