Full question:
can personal e-mails intermingled with business e-mails sent and received on business computers create a risk to the corporate veil protection?
- Category: Corporations
- Date:
- State: New Jersey
Answer:
Most successful efforts to pierce a corporate or LLC veil occur when a "mom and pop" business owner intermingles personal and business finances, such as when he pays personal bills from a corporate account. The corporate veil is pierced in that case because the corporation is the legal alter-ego of the controlling owner.
Typically, the issue involves company assets and it fact or situation specific.
In New Jersey, the term is referred to as the "alter ego doctrine". If a party whose interest has been injured due to the acts or negligence of a corporation or LLC can prove that the company is the "alter ego" of one or more individuals, the court may hold the individuals themselves personally responsible for the damages or injurious conduct.
When examining the situation, the court may look to see whether the shareholder/member did not treat the company as an entity separate and apart from themselves and whether maintaining the corporate veil would be inequitable.
The equitable remedy of piercing the corporate veil is applied in New Jersey in situations where the principal, i.e. owner, uses the corporation (or his LLC) as his “alter ego” and thus abuses the corporate form in order to advance his own personal interests. See Walensky v. Jonathan Royce International, Inc., 264 N.J. Super. 276 (App. Div. 1993). The two primary factors that weigh in favor of an “alter ego” finding are the use of the business as a personal business conduit and a lack of a separate corporate identity. Judge Stripp distinctly summarized the criteria for piercing the corporate veil under New Jersey common laws as follows:
A shareholder disregarded the corporate entity and made it into a mere instrumentality for their own affairs.
There was such a unity of interest and ownership that the owners and the corporation have no separate existence; and
Upholding the corporate veil would protect fraud or promote other injustice.
Whether or not using the corporate e-mail account for personal reasons is enough to pierce the veil would be a matter of judgment for the court based on specific circumstances.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
