Answer: When a court considers whether to pierce the corporate veil, it evaluates various factors to determine whether fairness demands such a piercing. The factors that are considered can vary depending on the jurisdiction and the specific circumstances of the case, but some of the commonly considered factors include:
I. Inadequate capitalization.
IV. Failing to follow corporate formalities.
Poor business judgment by the principals and personal wealth of the principals are generally not relevant factors when judging whether fairness demands that the corporate veil be pierced. Instead, the focus is on whether the corporation was properly capitalized and maintained its separate legal existence by following corporate formalities such as holding regular board meetings, maintaining separate records, and avoiding commingling of assets.
If the corporation did not do these things, it may be more likely that the court will pierce the corporate veil and hold the individual shareholders or officers personally liable for the corporation's debts or obligations.