Document Type

Article

Publication Date

10-15-2019

Abstract

Theories of successor liability and piercing the corporate veil are not substantive legal doctrines but rather shorthand descriptions of equitable remedies adopted by courts in the interests of fairness and justice. These interests include striking a balance between the limitation on shareholders’ individual liability – essential to the modern corporate form – and curtailing incentives for controllers of corporations to use the corporation as a weapon against innocent creditors. Applying principles of Equity, courts analyze a transaction according to its real nature, looking through its form to its substance and intent. Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 560 (2008). Piercing the corporate veil in the context of sole-shareholder professional corporations is noncontroversial. A professional corporation is not a license to engage in fraud. Where a sole-shareholder has abused the corporate form, courts should not bow to form and provide comfort.

As to successor liability, however, this Court’s precedents to date have involved only successor business corporations. As the trial judge noted, it appears to be an issue of first impression whether these corporate precedents apply in the same manner or force where the purported successor is not a limited liability entity, but a sole proprietor conducting a personal services business in which he is licensed to engage. A367-68.

Argument I addresses general principles drawn from the Court’s precedents and discusses whether the nature of professional corporations and the specific provisions of G.L. 156A dictate a different result from that which would occur in a case involving a general business corporation. Argument II addresses whether Supreme Judicial Court Rule 3:06, which governs lawyers practicing under a professional corporation, warrants a different outcome than Chapter 156A would otherwise dictate.

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