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Piercing the Corporate Veil to Collect DebtOne of the purposes of forming a corporation is to separate the debt liability of the business from its shareholders. When a corporation defaults on its debts, the creditor is often limited to collecting the debt from the corporation itself. If the corporation has insufficient assets or dissolves, it becomes more difficult to retrieve the full debt. However, courts will allow a creditor to seek compensation from a corporation’s shareholders in certain situations. The practice is called piercing the corporate veil, and its success depends on the type of corporation and how closely the shareholders are connected to it.

Piercing the Veil

Illinois courts are likely to protect shareholders from personal liability in a corporate debt case. When deciding whether to pierce the corporate veil, a court is instructed to consider:

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Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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