Professor Seth C. Oranburg explores reverse veil piercing, an advanced variation of the doctrine that inverts the traditional approach. Instead of reaching an owner’s personal assets to satisfy an entity’s debts, reverse piercing allows creditors—or in some cases, owners themselves—to reach the entity’s assets to satisfy an owner’s personal obligations. The episode distinguishes between two types: Insider reverse piercing – initiated by owners (often in family law or tax contexts) to access corporate assets, typically with fewer policy concerns when all owners consent. Outsider reverse piercing – initiated by third-party creditors to attach entity assets, subject to stricter scrutiny, particularly when multiple owners’ interests could be harmed. Through parallels to cases like Sea-Land Services v. Pepper Source, Oranburg explains that the familiar factors—unity of interest, commingling, and misuse of the entity—remain central, but the direction of liability is reversed. The episode also addresses policy debates: while reverse piercing can prevent owners from hiding personal assets inside corporate shells, critics warn it risks undermining limited liability and discouraging business formation. The takeaway: reverse veil piercing is an equitable but narrowly applied remedy, most often in closely held or single-owner entities, and requires clear evidence of abuse to overcome the entity’s liability shield.

Ask this episode

“What did the council decide on item 42?” — answered with the speaker and the moment.

Transcript

Related