Connecticut House Bill HB07340

Connecticut 2019 Regular Session

• Introduced: 3/8/19
• Refer: 3/8/19
• Report Pass: 4/8/19
• Refer: 4/18/19
• Report Pass: 4/25/19
• Engrossed: 5/14/19
• Report Pass: 5/16/19
• Chaptered: 6/25/19
• Enrolled: 6/28/19
• Passed: 7/9/19

Caption

An Act Concerning The 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 Responsibility Of A Domestic Entity For The Debts, Obligations Or Other Liabilities Of An Interest Holder Of Such Entity.

Impact

The impact of HB 7340 on state laws is significant, as it sets a higher threshold for piercing the corporate veil, which thus provides broader protections for individuals involved with domestic entities. By delineating clear criteria for when veils can be pierced, the bill endeavors to enhance legal predictability for business interests operating under limited liability. This regulation could particularly benefit small business owners and investors, who may otherwise risk personal liability for corporate obligations. It strengthens the corporate structure by emphasizing the principle of corporate separateness, aligning with best practices in commercial law.

Summary

House Bill 7340 addresses the doctrine of veil piercing within the context of determining an interest holder's personal responsibility for the debts and obligations of a domestic entity. This bill clarifies that any statutory limitations on the liability of an interest holder cannot be disregarded unless certain conditions are met, particularly that the interest holder exerted control over the entity and used that control in a manner that constitutes wrongdoing. This legal change aims to protect interest holders from personal liability under ordinary circumstances, reinforcing the separation between personal and entity liabilities in business operations.

Sentiment

The sentiment around HB 7340 appears to be generally positive among business advocates and legal professionals who favor increased protections for interest holders. Supporters argue that the bill promotes economic growth by encouraging investment and entrepreneurship through clearer legal parameters. Conversely, some critics may express concern that such protections could enable mismanagement or wrongdoing without sufficient regulatory oversight, highlighting the tension between protecting business interests and ensuring accountability within corporate frameworks. This divide reflects broader themes in discussions of business law reform.

Contention

While HB 7340 received broad support, notable points of contention relate to the balance it seeks to strike between protecting interest holders and preventing potential misuse of corporate structures to evade responsibility. Critics may argue that the heightened standard for veil piercing could lead to situations where victims of fraud or business misconduct find it difficult to hold individuals accountable for their actions. The challenge lies in ensuring that while the bill provides necessary protections for genuine businesses, it does not inadvertently facilitate unethical corporate behavior.