Substitute House Bill No. 7340
Public Act No. 19-181
AN ACT CONCERNING TH E USE OF VEIL PIERCI NG TO
DETERMINE THE PERSON AL RESPONSIBILITY OF AN INTEREST
HOLDER OF A DOMESTIC ENTITY FOR THE DEBTS,
OBLIGATIONS OR OTHER LIABILITIES OF SUCH ENTITY AND
THE RESPONSIBILITY OF A DOMESTIC ENTITY FOR THE DEBTS,
OBLIGATIONS OR OTHER LIABILITIES OF AN IN TEREST
HOLDER OF SUCH ENTIT Y.
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
action filed on or after the effective date of this section) As used in this
section and sections 2 and 3 of this act:
(1) "Affiliate" means with respect to any specified person, any other
person directly or indirectly controlling, controlled by or under
common control with such specified person. As used in this
subdivision, "control" has the same meaning given to that term in 17
CFR 240.12b-2, as amended from time to time;
(2) "Domestic entity" means an entity whose internal affairs are
governed by the law of this state;
(3) "Entity" means (A) a business corporation, (B) a nonstock
corporation, (C) a limited liability partnership, (D) a limited
partnership, including a limited liability limited partnership, (E) a Substitute House Bill No. 7340
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limited liability company, or (F) any other person that (i) has a separate
legal existence, and (ii) is subject to a provision of the general statutes
which provides that an interest holder of such person is not personally
liable for a debt, obligation or other liability of such person solely by
reason of being or acting as such interest holder;
(4) "Governance interest" has the same meaning as provided in
section 34-600 of the general statutes;
(5) "Governor" has the same meaning as provided in section 34-600
of the general statutes;
(6) "Interest" means (A) a governance interest in an entity, (B) a
transferable interest in an entity, or (C) a share, membership interest or
other ownership interest in an entity;
(7) "Interest holder" has the same meaning as provided in section 34-
600 of the general statutes;
(8) "Person" has the same meaning as provided in section 34-600 of
the general statutes; and
(9) "Transferable interest" has the same meaning as provided in
section 34-600 of the general statutes.
Sec. 2. (NEW) (Effective from passage and applicable to any civil action
filed on or after the effective date of this section) (a) A statutory limitation
on the liability of an interest holder of a domestic entity for a debt,
obligation or other liability of such domestic entity, including without
limitation, the limitation set forth in section 33-673 or 34-251a of the
general statutes, may not be disregarded based upon a veil piercing
doctrine, claim or remedy in connection with a transaction to which
the entity is a party, unless a court finds by a preponderance of the
evidence that: (1) The interest holder exerted complete domination and
control over the management, finances, policies and activities of such Substitute House Bill No. 7340
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entity with respect to such transaction; (2) such domination and
control was used by the interest holder to (A) commit fraud or other
intentional wrong against the person asserting such doctrine, claim or
remedy, (B) intentionally violate a statutory or common law duty to
such person, or (C) commit a deceitful or other unlawful act against
such person; and (3) the domination and control exerted by the interest
holder and the breach of duty or other act proximately caused injury or
loss to the person asserting such doctrine, claim or remedy.
(b) In making a determination under subdivision (1) of subsection
(a) of this section, a court shall consider factors that include, but are not
limited to, whether: (1) The entity was adequately capitalized, (2)
assets of the entity were distributed or otherwise transferred from the
entity to the interest holder or any affiliate of such interest holder
without any lawful business purpose, (3) there were overlapping
interest holders, governors or other management personnel between
the entity and the interest holder or any affiliate of such interest
holder, (4) the interest holder or any affiliate of such interest holder
shared office spaces, addresses and telephone numbers with the entity
without payment of fair consideration, (5) transactions involving the
entity and the interest holder or any affiliate of such interest holder
were at arm's length and for fair consideration, (6) funds of the entity
were commingled with funds of the interest holder or any affiliate of
such interest holder, (7) the entity was treated as a separate legal entity
for financial and other business purposes as evidenced by having its
own contractual relationships, bank accounts, books of account and
financial statements, (8) the entity was insolvent or rendered insolvent
by the acts of the interest holder or any affiliate of such interest holder,
and (9) the property of the entity was used by the interest holder or
any affiliate of such interest holder without payment of fair
consideration.
(c) The burden of proof shall be on the person seeking to hold the Substitute House Bill No. 7340
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interest holder of a domestic entity responsible for the debts,
obligations or other liabilities of such entity.
(d) The failure of a domestic entity to observe formalities relating to
the exercise of its powers or the management of its activities and
affairs is not grounds for imposing personal liability on an interest
holder of such entity for a debt, obligation or other liability of such
entity based upon a veil piercing doctrine, claim or remedy.
(e) When determining whether a statutory limitation on the liability
of an interest holder of a domestic entity for a debt, obligation or other
liability of such domestic entity, including without limitation, the
limitation set forth in section 33-673 or 34-251a of the general statutes,
may be disregarded based upon on a veil piercing doctrine, claim or
remedy, a court shall make such determination exclusively in
accordance with the provisions of this section and section 1 of this act.
Sec. 3. (NEW) (Effective from passage and applicable to any civil action
filed on or after the effective date of this section) No domestic entity shall be
responsible for a debt, obligation or other liability of an interest holder
of such entity based upon a reverse veil piercing doctrine, claim or
remedy.