Connecticut 2019 Regular Session

Connecticut House Bill HB07340 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
	1	+
	2	+
	3	+	LCO \\PRDFS1\HCOUSERS\BARRYJN\WS\2019HB-07340-R01-
	4	+	HB.docx
	5	+	1 of 4
	6	+
	7	+	General Assembly Substitute Bill No. 7340
	8	+	January Session, 2019
1	9
2	10
3	11
4		-	Substitute House Bill No. 7340
5		-
6		-	Public Act No. 19-181
7	12
8	13
9		-	AN ACT CONCERNING TH E USE OF VEIL PIERCI NG TO
10		-	DETERMINE THE PERSON AL RESPONSIBILITY OF AN INTEREST
11		-	HOLDER OF A DOMESTIC ENTITY FOR THE DEBTS,
12		-	OBLIGATIONS OR OTHER LIABILITIES OF SUCH ENTITY AND
13		-	THE RESPONSIBILITY OF A DOMESTIC ENTITY FOR THE DEBTS,
14		-	OBLIGATIONS OR OTHER LIABILITIES OF AN IN TEREST
15		-	HOLDER OF SUCH ENTIT Y.
	14	+	AN ACT CONCERNING TH E USE OF VEIL PIERCING TO DETERMINE
	15	+	THE PERSONAL RESPONSIBILITY OF AN INTEREST HOLDER OF A
	16	+	DOMESTIC ENTITY FOR THE DEBTS, OBLIGATIONS OR OTHER
	17	+	LIABILITIES OF SUCH ENTITY AND THE RESPO NSIBILITY OF A
	18	+	DOMESTIC ENTITY FOR THE DEBTS, OBLIGATIONS OR OTHER
	19	+	LIABILITIES OF AN INTEREST HOLDER OF SUC H ENTITY.
16	20		Be it enacted by the Senate and House of Representatives in General
17	21		Assembly convened:
18	22
19		-	Section 1. (NEW) (Effective from passage and applicable to any civil
20		-	action filed on or after the effective date of this section) As used in this
21		-	section and sections 2 and 3 of this act:
22		-	(1) "Affiliate" means with respect to any specified person, any other
23		-	person directly or indirectly controlling, controlled by or under
24		-	common control with such specified person. As used in this
25		-	subdivision, "control" has the same meaning given to that term in 17
26		-	CFR 240.12b-2, as amended from time to time;
27		-	(2) "Domestic entity" means an entity whose internal affairs are
28		-	governed by the law of this state;
29		-	(3) "Entity" means (A) a business corporation, (B) a nonstock
30		-	corporation, (C) a limited liability partnership, (D) a limited
31		-	partnership, including a limited liability limited partnership, (E) a Substitute House Bill No. 7340
	23	+	Section 1. (NEW) (Effective from passage and applicable to any civil 1
	24	+	action filed on or after the effective date of this section) As used in this 2
	25	+	section and sections 2 and 3 of this act: 3
	26	+	(1) "Affiliate" means with respect to any specified person, any other 4
	27	+	person directly or indirectly controlling, controlled by or under 5
	28	+	common control with such specified person. As used in this 6
	29	+	subdivision, "control" has the same meaning given to that term in 17 7
	30	+	CFR 240.12b-2, as amended from time to time; 8
	31	+	(2) "Domestic entity" means an entity whose internal affairs are 9
	32	+	governed by the law of this state; 10
	33	+	(3) "Entity" means (A) a business corporation, (B) a nonstock 11
	34	+	corporation, (C) a limited liability partnership, (D) a limited 12
	35	+	partnership, including a limited liability limited partnership, (E) a 13
	36	+	limited liability company, or (F) any other person that (i) has a separate 14
	37	+	legal existence, and (ii) is subject to a provision of the general statutes 15 Substitute Bill No. 7340
32	38
33		-	Public Act No. 19-181 2 of 4
34	39
35		-	limited liability company, or (F) any other person that (i) has a separate
36		-	legal existence, and (ii) is subject to a provision of the general statutes
37		-	which provides that an interest holder of such person is not personally
38		-	liable for a debt, obligation or other liability of such person solely by
39		-	reason of being or acting as such interest holder;
40		-	(4) "Governance interest" has the same meaning as provided in
41		-	section 34-600 of the general statutes;
42		-	(5) "Governor" has the same meaning as provided in section 34-600
43		-	of the general statutes;
44		-	(6) "Interest" means (A) a governance interest in an entity, (B) a
45		-	transferable interest in an entity, or (C) a share, membership interest or
46		-	other ownership interest in an entity;
47		-	(7) "Interest holder" has the same meaning as provided in section 34-
48		-	600 of the general statutes;
49		-	(8) "Person" has the same meaning as provided in section 34-600 of
50		-	the general statutes; and
51		-	(9) "Transferable interest" has the same meaning as provided in
52		-	section 34-600 of the general statutes.
53		-	Sec. 2. (NEW) (Effective from passage and applicable to any civil action
54		-	filed on or after the effective date of this section) (a) A statutory limitation
55		-	on the liability of an interest holder of a domestic entity for a debt,
56		-	obligation or other liability of such domestic entity, including without
57		-	limitation, the limitation set forth in section 33-673 or 34-251a of the
58		-	general statutes, may not be disregarded based upon a veil piercing
59		-	doctrine, claim or remedy in connection with a transaction to which
60		-	the entity is a party, unless a court finds by a preponderance of the
61		-	evidence that: (1) The interest holder exerted complete domination and
62		-	control over the management, finances, policies and activities of such Substitute House Bill No. 7340
	40	+	LCO {\\PRDFS1\HCOUSERS\BARRYJN\WS\2019HB-07340-
	41	+	R01-HB.docx }
	42	+	2 of 4
63	43
64		-	Public Act No. 19-181 3 of 4
	44	+	which provides that an interest holder of such person is not personally 16
	45	+	liable for a debt, obligation or other liability of such person solely by 17
	46	+	reason of being or acting as such interest holder; 18
	47	+	(4) "Governance interest" has the same meaning as provided in 19
	48	+	section 34-600 of the general statutes; 20
	49	+	(5) "Governor" has the same meaning as provided in section 34-600 21
	50	+	of the general statutes; 22
	51	+	(6) "Interest" means (A) a governance interest in an entity, (B) a 23
	52	+	transferable interest in an entity, or (C) a share, membership interest or 24
	53	+	other ownership interest in an entity; 25
	54	+	(7) "Interest holder" has the same meaning as provided in section 34-26
	55	+	600 of the general statutes; 27
	56	+	(8) "Person" has the same meaning as provided in section 34-600 of 28
	57	+	the general statutes; and 29
	58	+	(9) "Transferable interest" has the same meaning as provided in 30
	59	+	section 34-600 of the general statutes. 31
	60	+	Sec. 2. (NEW) (Effective from passage and applicable to any civil action 32
	61	+	filed on or after the effective date of this section) (a) A statutory limitation 33
	62	+	on the liability of an interest holder of a domestic entity for a debt, 34
	63	+	obligation or other liability of such domestic entity, including without 35
	64	+	limitation, the limitation set forth in section 33-673 or 34-251a of the 36
	65	+	general statutes, may not be disregarded based upon a veil piercing 37
	66	+	doctrine, claim or remedy in connection with a transaction to which 38
	67	+	the entity is a party, unless a court finds by clear and convincing 39
	68	+	evidence that: (1) The interest holder exerted complete domination and 40
	69	+	control over the management, finances, policies and activities of such 41
	70	+	entity with respect to such transaction; (2) such domination and 42
	71	+	control was used by the interest holder to (A) commit fraud or other 43
	72	+	intentional wrong against the person asserting such doctrine, claim or 44
	73	+	remedy, (B) intentionally violate a statutory or common law duty to 45 Substitute Bill No. 7340
65	74
66		-	entity with respect to such transaction; (2) such domination and
67		-	control was used by the interest holder to (A) commit fraud or other
68		-	intentional wrong against the person asserting such doctrine, claim or
69		-	remedy, (B) intentionally violate a statutory or common law duty to
70		-	such person, or (C) commit a deceitful or other unlawful act against
71		-	such person; and (3) the domination and control exerted by the interest
72		-	holder and the breach of duty or other act proximately caused injury or
73		-	loss to the person asserting such doctrine, claim or remedy.
74		-	(b) In making a determination under subdivision (1) of subsection
75		-	(a) of this section, a court shall consider factors that include, but are not
76		-	limited to, whether: (1) The entity was adequately capitalized, (2)
77		-	assets of the entity were distributed or otherwise transferred from the
78		-	entity to the interest holder or any affiliate of such interest holder
79		-	without any lawful business purpose, (3) there were overlapping
80		-	interest holders, governors or other management personnel between
81		-	the entity and the interest holder or any affiliate of such interest
82		-	holder, (4) the interest holder or any affiliate of such interest holder
83		-	shared office spaces, addresses and telephone numbers with the entity
84		-	without payment of fair consideration, (5) transactions involving the
85		-	entity and the interest holder or any affiliate of such interest holder
86		-	were at arm's length and for fair consideration, (6) funds of the entity
87		-	were commingled with funds of the interest holder or any affiliate of
88		-	such interest holder, (7) the entity was treated as a separate legal entity
89		-	for financial and other business purposes as evidenced by having its
90		-	own contractual relationships, bank accounts, books of account and
91		-	financial statements, (8) the entity was insolvent or rendered insolvent
92		-	by the acts of the interest holder or any affiliate of such interest holder,
93		-	and (9) the property of the entity was used by the interest holder or
94		-	any affiliate of such interest holder without payment of fair
95		-	consideration.
96		-	(c) The burden of proof shall be on the person seeking to hold the Substitute House Bill No. 7340
97	75
98		-	Public Act No. 19-181 4 of 4
	76	+	LCO {\\PRDFS1\HCOUSERS\BARRYJN\WS\2019HB-07340-
	77	+	R01-HB.docx }
	78	+	3 of 4
99	79
100		-	interest holder of a domestic entity responsible for the debts,
101		-	obligations or other liabilities of such entity.
102		-	(d) The failure of a domestic entity to observe formalities relating to
103		-	the exercise of its powers or the management of its activities and
104		-	affairs is not grounds for imposing personal liability on an interest
105		-	holder of such entity for a debt, obligation or other liability of such
106		-	entity based upon a veil piercing doctrine, claim or remedy.
107		-	(e) When determining whether a statutory limitation on the liability
108		-	of an interest holder of a domestic entity for a debt, obligation or other
109		-	liability of such domestic entity, including without limitation, the
110		-	limitation set forth in section 33-673 or 34-251a of the general statutes,
111		-	may be disregarded based upon on a veil piercing doctrine, claim or
112		-	remedy, a court shall make such determination exclusively in
113		-	accordance with the provisions of this section and section 1 of this act.
114		-	Sec. 3. (NEW) (Effective from passage and applicable to any civil action
115		-	filed on or after the effective date of this section) No domestic entity shall be
116		-	responsible for a debt, obligation or other liability of an interest holder
117		-	of such entity based upon a reverse veil piercing doctrine, claim or
118		-	remedy.
	80	+	such person, or (C) commit a deceitful or other unlawful act against 46
	81	+	such person; and (3) the domination and control exerted by the interest 47
	82	+	holder and the breach of duty or other act proximately caused injury or 48
	83	+	loss to the person asserting such doctrine, claim or remedy. 49
	84	+	(b) In making a determination under subdivision (1) of subsection 50
	85	+	(a) of this section, a court shall consider factors that include, but are not 51
	86	+	limited to, whether: (1) The entity was adequately capitalized, (2) 52
	87	+	assets of the entity were distributed or otherwise transferred from the 53
	88	+	entity to the interest holder or any affiliate of such interest holder 54
	89	+	without any lawful business purpose, (3) there were overlapping 55
	90	+	interest holders, governors or other management personnel between 56
	91	+	the entity and the interest holder or any affiliate of such interest 57
	92	+	holder, (4) the interest holder or any affiliate of such interest holder 58
	93	+	shared office spaces, addresses and telephone numbers with the entity 59
	94	+	without payment of fair consideration, (5) transactions involving the 60
	95	+	entity and the interest holder or any affiliate of such interest holder 61
	96	+	were at arm's length and for fair consideration, (6) funds of the entity 62
	97	+	were commingled with funds of the interest holder or any affiliate of 63
	98	+	such interest holder, (7) the entity was treated as a separate legal entity 64
	99	+	for financial and other business purposes as evidenced by having its 65
	100	+	own contractual relationships, bank accounts, books of account and 66
	101	+	financial statements, (8) the entity was insolvent or rendered insolvent 67
	102	+	by the acts of the interest holder or any affiliate of such interest holder, 68
	103	+	and (9) the property of the entity was used by the interest holder or 69
	104	+	any affiliate of such interest holder without payment of fair 70
	105	+	consideration. 71
	106	+	(c) The burden of proof shall be on the person seeking to hold the 72
	107	+	interest holder of a domestic entity responsible for the debts, 73
	108	+	obligations or other liabilities of such entity. 74
	109	+	(d) The failure of a domestic entity to observe formalities relating to 75
	110	+	the exercise of its powers or the management of its activities and 76
	111	+	affairs is not grounds for imposing personal liability on an interest 77
	112	+	holder of such entity for a debt, obligation or other liability of such 78 Substitute Bill No. 7340
	113	+
	114	+
	115	+	LCO {\\PRDFS1\HCOUSERS\BARRYJN\WS\2019HB-07340-
	116	+	R01-HB.docx }
	117	+	4 of 4
	118	+
	119	+	entity based upon a veil piercing doctrine, claim or remedy. 79
	120	+	(e) When determining whether a statutory limitation on the liability 80
	121	+	of an interest holder of a domestic entity for a debt, obligation or other 81
	122	+	liability of such domestic entity, including without limitation, the 82
	123	+	limitation set forth in section 33-673 or 34-251a of the general statutes, 83
	124	+	may be disregarded based upon on a veil piercing doctrine, claim or 84
	125	+	remedy, a court shall make such determination exclusively in 85
	126	+	accordance with the provisions of this section and section 1 of this act. 86
	127	+	Sec. 3. (NEW) (Effective from passage and applicable to any civil action 87
	128	+	filed on or after the effective date of this section) No domestic entity shall be 88
	129	+	responsible for a debt, obligation or other liability of an interest holder 89
	130	+	of such entity based upon a reverse veil piercing doctrine, claim or 90
	131	+	remedy. 91
	132	+	This act shall take effect as follows and shall amend the following
	133	+	sections:
	134	+
	135	+	Section 1 from passage and
	136	+	applicable to any civil
	137	+	action filed on or after the
	138	+	effective date of this section
	139	+	New section
	140	+	Sec. 2 from passage and
	141	+	applicable to any civil
	142	+	action filed on or after the
	143	+	effective date of this section
	144	+	New section
	145	+	Sec. 3 from passage and
	146	+	applicable to any civil
	147	+	action filed on or after the
	148	+	effective date of this section
	149	+	New section
	150	+
	151	+	Statement of Legislative Commissioners:
	152	+	In Section 1, the definition of "control" was included in Subdivision (1)
	153	+	and the remaining subdivisions were renumbered accordingly for
	154	+	consistency with standard drafting conventions.
	155	+
	156	+	JUD Joint Favorable Subst.
119	157