pjc-family-2024-lib

D ISREGARDING C ORPORATE F ORM

PJC 205.1

PJC 205.1

Mere Tool or Business Conduit (Alter Ego)

A corporation is an entity distinct from its shareholders. However, the dis tinct corporate identity of the corporation may be disregarded if there is such unity between the corporation and a shareholder that the separateness of the corporation has ceased and the shareholder’s improper use of the corporation has damaged the community estate. In deciding whether there is such unity between a corporation and a share holder that the separateness of the corporation has ceased, you are to consider the total dealings of the corporation and the shareholder , including— 1. The degree to which the corporation’s property has been kept sepa rate from that of the shareholder . 2. The amount of financial interest, ownership, and control the share holder maintains over the corporation. 3. Whether the corporation has been used for personal purposes. It is not necessary that each of the factors be present or that each be given equal weight; rather, you should determine from the totality of the circum stances whether the distinct corporate identity of the corporation should be dis regarded. Mere domination of corporate affairs by a sole shareholder or financial unity between shareholder and corporation will not justify a disregard of the corporate identity. COMMENT Source. The foregoing instruction is derived from Castleberry v. Branscum , 721 S.W.2d 270 (Tex. 1986), and Lifshutz v. Lifshutz , 61 S.W.3d 511 (Tex. App.—San Antonio 2001, pet. denied). The language of Castleberry has been modified to reflect the provisions of Tex. Bus. Corp. Act art. 2.21(A)(3) (expired Jan. 1, 2010, subse quently codified as Tex. Bus. Orgs. Code § 21.223(a)(3)), which eliminated the failure to observe corporate formalities as a consideration for piercing the corporate veil. The court in Lifshutz , 61 S.W.3d at 517, stated one of the requirements for disre garding the corporate identity to be that “the spouse’s improper use of the corporation damaged the community estate beyond that which might be remedied by a claim for reimbursement.” The words “beyond that which might be remedied by a claim for reimbursement” have been omitted from the charge because it is for the court to deter mine whether the damage to the community exceeds that which might be remedied by reimbursement.

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