Impact | Business Risk Management Blog

A recent decision from the Illinois Appellate Court for the First District should be a reminder to business owners, executives and advisors of the importance of following corporate formalities and the dire consequences of failing to do so. As most business owners know, the primary purpose of organizing a corporation is to insulate the business’ shareholders, directors and officers in the corporation from liability to third parties. Traditionally, it is only when shareholders, directors and officers fail to treat the corporation as a separate and distinct entity and fail to follow corporate formalities, that courts may ignore the corporate entity and “pierce the corporate veil” to hold the shareholders, directors and officers personally liable. However, in Buckley v. Abuzir, 2014 IL App (1st) 130469, the appellate court held that under certain circumstances, a court may “pierce the corporate veil” and hold someone that not a shareholder, director or officer personally liable for the acts of the corporation.