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55 Denv. L.J. 1 (1978)
Piercing the Corporate Veil: Focusing the Inquiry

handle is hein.journals/denlr55 and id is 9 raw text is: DENVER LAW JOURNAL
VOLUME 55                            1978                         NUMBER 1
PIERCING THE CORPORATE VEIL: FOCUSING THE
INQUIRY
By CATHY S. KRENDL** and JAMES R. KRENDL*
I. THE ROLE OF THE CORPORATE VEIL DOCTRINE
A fundamental tenet of Anglo-American law is the concept
that a corporation will ordinarily be treated as a legal entity
separate from its shareholders.' The shareholders can thus confi-
dently commit limited capital to the corporation with the assur-
ance that they will have no personal liability for the corporation's
debts.' This tenet is based on the theory that the corporation is
an artificial entity, separate from      the shareholders.3 Further, it is
* Partner, Cohen, Brame, Smith & Krendl, Denver, Colorado; B.A., 1963, Harvard
University; J.D., 1970, Harvard Law School.
** Associate Professor of Law, University of Denver College of Law; B.A., 1967, North
Texas State University; J.D., 1970, Harvard Law School. The authors wish to acknowl-
edge their appreciation to Mr. Arnold Guttenberg, a third-year law student at the Univer-
sity of Denver, who diligently and skillfully performed much of the legal research for this
article.
See H. BALLANTINE, CORPORATIONS, § 122 at 293 (rev. ed. 1946) [hereinafter cited
as BALLANTINE]; W. FLETCHER, CYCLOPEDIA OF CORPORATIONS, § 25 at 100 (rev. vol. 1974)
[hereinafter cited as FLETCHER]; H. HENN, LAW OF CORPORATIONS, § 252 at 501 (2d ed.
1970) [hereinafter cited as HENN]; F. POWELL, PARENT AND SUBSIDIARY CORPORATIONS, § 1
at 1 (1931) [hereinafter cited as POWELL]. The general rule cited by these authorities is
usually cast in these words of Judge Sanborn in United States v. Milwaukee Refrigerator
Transit Co., 142 F. 247, 255 (C.C.E.D. Wis. 1905):
If any general rule can be laid down in the present state of authority, it is
that a corporation will be looked upon as a legal entity as a general rule, and
until sufficient reason to the contrary appears; but, when the notion of legal
entity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, the law will regard the corporation as an association of persons.
For an English case illustrating the strong policy of recognizing corporateness, see Salo-
mon v. A. Salomon & Co., L.R. [1897] A.C. 22, 38, rev'g Broderip v. Salomon, L.R.
[1895] 2 Ch. 323, cited in BALLANTINE, supra note 1, at 298-99.
1 Subscribers and shareholders will normally be liable to the corporation or its credi-
tors for the full consideration for which their shares are issued. See, e.g., CAL. CORP. CODE
§ 410 (West 1977); COLO. REv. STAT. § 7-4-120 (1973); DEL. CODE tit. 8 § 162 (1974); ILL.
REV. STAT. ch. 32, § 157.23 (1975); N.Y. Bus. CORP. LAW § 628 (McKinney 1963); TEx.
Bus. CORP. ACT ANN. art. 2.21 (Vernon 1956).
1 For a discussion of the theories of corporateness (separate artificial entity versus

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