- In NJ, Courts will disregard protection for officers, shareholders and directors and hold these individuals legally and personally liable for damages if they use their corporation as their alter ego and abuse the corporate form of doing business in order to advance their personal interests.
“Where individuals set up ‘legitimate business structures to further their personal and business plans’ and ‘d[o] not use their [businesses] to commit fraud or defeat the ends of justice,’ the veil-piercing doctrine will not apply. Personal liability may, however, be imposed upon a controlling stockholder of a close corporation if he or she uses the corporation as a vehicle for committing equitable or legal fraud.
Understanding the Term Fraud in the Inducement in Business Litigation
The elements of fraud in the inducement are: a misrepresentation of material fact; knowledge or belief by the person of its falsity; intent that the other party relied on the misrepresentation; and that his or her reliance was reasonable.
Fraud in the inducement does not differ materially from common-law fraud, as it provides a cognizable basis for equitable relief in the event a false promise induced reliance.
A trial judge when making findings of fact with regard to the lack of corporate structure and compliance with corporate formalities, will look to the existence of record-keeping and government required filings, etc.
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By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Corporate Law Attorney