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Home > Judgment Enforcement > Piercing the Corporate Veil and Successor Liability

Piercing the Corporate Veil and Successor Liability

Holding Individuals and Related Businesses Accountable When Corporate Forms are Misused

Judgment debtors often assume they can avoid paying what they owe by hiding behind corporate structures, dissolving entities, or shifting operations into new companies. New York law recognizes when these tactics are misused, and it allows creditors to reach the individuals or successor entities that truly control the assets.

I handle these matters selectively because they require careful financial analysis, documentary reconstruction, and a nuanced understanding of how corporate forms are manipulated in real judgment-enforcement scenarios.

When the Corporate Veil May Be Pierced

Courts will disregard the corporate form when two conditions are met:

  1. an individual exercised complete domination over the company, and
  2. that domination was used to commit a wrong that harmed the creditor.
To evaluate whether veil-piercing is appropriate, courts look at indicators such as:
  • commingling of personal and business funds,
  • inadequate capitalization,
  • ignoring corporate formalities,
  • using the business to pay personal expenses,
  • transferring assets without fair consideration,
  • dissolving the company once liability arises,
  • continuing the same business through a different entity.
No single factor is dispositive. The question is whether the company functioned independently or merely as an instrument of its owner.

Successor Liability: Reaching the “New” Company

When a debtor abandons or dissolves one entity and shifts operations to another, the new business may still be responsible for the prior company’s debts. Successor liability often applies when:

  • the new entity continues the same business activities,
  • ownership or management overlaps,
  • employees, customers, or suppliers remain the same,
  • the new company benefits from the goodwill, assets, or infrastructure of the old one,
  • the restructuring occurred after litigation began,
  • the transition was designed to obstruct enforcement.
Courts focus on the continuity of operations rather than the name printed on incorporation papers.

Why These Doctrines Matter in Judgment Enforcement

Corporate structures are legitimate when used properly, but they cannot be manipulated to evade legal obligations. Veil-piercing and successor-liability claims ensure that:

  • debtors cannot hide behind shell companies,
  • insiders cannot strip assets from a business to defeat a judgment,
  • newly formed companies that merely continue the old business remain accountable,
  • creditors have access to the full economic reality of how the debtor operates.
These doctrines are often decisive in cases involving family-run businesses, multiple related entities, or sudden restructuring after a judgment is entered.

Developing the Evidence Required

These cases succeed when supported by a detailed factual record. I examine:

  • bank statements, transfers, and patterns of commingling,
  • tax filings and corporate records,
  • payroll and compensation structures,
  • contracts, leases, or service agreements showing continuity,
  • organizational documents and ownership changes,
  • internal emails or communications that reveal who truly makes decisions.
The objective is to understand the flow of money, the flow of control, and whether the entity functioned as a genuine business or merely as a shield.

How Veil-Piercing Interacts with Other Enforcement Tools

Veil-piercing is rarely used alone. It often operates alongside:

  • fraudulent-transfer litigation,
  • turnover proceedings under CPLR § 5225(b),
  • restraining notices to freeze assets held by related entities,
  • subpoenas directed at insiders or successor companies,
  • depositions to probe operational control and ownership.
Together, these tools create a coherent, evidence-driven enforcement strategy that reaches assets wherever they were transferred.

A Focused, Evidence-Based Strategy

Because veil-piercing and successor-liability claims depend on the totality of the evidence, I pursue them only when the financial and operational facts support the theory. When appropriate, these claims can extend liability to the individuals or entities that actually control the debtor’s assets, even when the formal business structure appears to shield them.

Veil Piercing and Successor Liability Frequently Asked Questions

When can a creditor pierce the corporate veil in New York?

Veil-piercing is available when an individual exercised complete domination over a company and used that domination to commit a wrong that harmed the creditor. Courts look at whether the company functioned as a real business or merely as the owner’s instrument for avoiding liability.

What kinds of behavior suggest that veil-piercing may be appropriate?

Indicators include commingling funds, inadequate capitalization, ignoring corporate formalities, paying personal expenses through the business, transferring assets without fair value, dissolving the company after liability arises, or running the same operations through a new entity. No single factor controls the outcome.

What is successor liability and how is it different from veil-piercing?

Successor liability applies when a new company continues the same business and benefits from the old company’s assets, goodwill, employees, or customers. Unlike veil-piercing, it does not require showing domination by an individual and instead focuses on continuity of operations.

Can a creditor reach assets held by a newly formed company?

Yes. If a debtor shifts operations, revenue streams, or assets into another entity, especially during or after litigation, the new company may be liable as a successor. Courts evaluate ownership overlap, shared management, continuity of employees and clients, and whether restructuring was designed to obstruct enforcement.

Do veil-piercing and successor-liability claims require separate litigation?

Often, yes. These claims are fact-intensive and are usually asserted through supplemental pleadings or separate enforcement actions. They frequently proceed alongside fraudulent-transfer claims, turnover proceedings, and insider discovery.

What evidence is needed to build a veil-piercing or successor-liability case?

Relevant evidence may include bank records, transfers, commingling patterns, tax filings, payroll records, leases or contracts showing continuity, corporate documents, ownership changes, and communications revealing who actually controls the business.

Is veil-piercing easy or automatic when a debtor uses multiple companies?

No. New York courts apply these doctrines cautiously. The creditor must show misuse of the corporate form and a clear connection between that misuse and the harm suffered.

What if the debtor dissolved the company after the judgment?

Dissolution does not eliminate liability. If operations continued through another entity or assets were distributed improperly, veil-piercing, successor liability, or fraudulent-transfer claims may still apply. Courts focus on economic reality rather than formal dissolution paperwork.

If a Debtor Is Using Business Entities to Evade a Judgment

Shifting operations, dissolving companies, and creating new entities do not necessarily insulate a debtor from enforcement. If these structures were used to avoid paying a lawful judgment, the law provides mechanisms to reach the responsible parties. If you believe a debtor is using corporate entities to conceal assets or continue business operations under a new name, contact my office for a structured evaluation.

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