Reverse Veil Piercing 

In veil piercing, an equityholder becomes responsible for the debts or actions of the business entity. Reverse piercing is when a business entity becomes responsible for the debts or actions of its equityholders.

There are two types of reverse veil piercing: inside reverse veil piercing and outside reverse veil piercing. Inside reverse veil piercing is when an insider wants the court to treat the corporation and the insider as the same entity to grant the insider either (1) access to a corporate asset or (2) the ability to bring a claim belonging to the corporation.​ Outside reverse veil piercing is when an outsider, a third-party, sues an insider and wants the corporation to pay the judgment. This is better than just attaching the shares because, if the outsider becomes a creditor, it will be senior in priority, and it will not have to struggle to dissolve the entity to get the assets.

Many jurisdictions hold that the same reasons for piercing the corporate veil are what qualify reverse piercing. Again, these elements are (1) domination and (2) injustice. However, other jurisdictions, for example, Nebraska, also require that reverse veil piercing won't harm an innocent third party. This element arises when the corporation has other shareholders. If the corporation with many innocent shareholders became liable for one shareholder's personal debt, it would harm the other shareholders.

Equitable Ownership 

Recall that veil piercing allows a shareholder to be held personally liable for the corporation's actions or debts if it is shown that the shareholder dominates the corporation and treating the entity separately would create an injustice. But what if the corporation is dominated by someone that is not a shareholder? If the person is not a shareholder, veil piercing isn't applicable. 

This is where equitable ownership comes in. Equitable ownership is a remedy in equity that allows a nonshareholder to be held liable for the actions of the corporation. The test is the same as veil piercing (domination and injustice) but it can apply to nonshareholders. Where the test is met, courts may hold a nonshareholder personally liable for the actions of the corporation.

Partnership

Recall that parties may form a partnership without intending to. A partnership is formed whenever two or more individuals or entities come together to carry on a business for profit. RUPA § 101(6). If the shareholder and the corporation are acting as partners, then they may each be responsible for the liabilities created on behalf of the partnership.

Agency Theories

Agency can also arise without the parties formally creating it. "Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act." §1.01 Rest. 3rd. If a corporation acts on behalf of another person and subject to that person's control, the corporation could be considered the agent of the person, and the person would be liable for the acts of the agent. See Great Am. Ins. Co. v. Linderman, 116 F. Supp. 3d 1183, 1195 (D. Or. 2015) (Mosman, J.). This is a distinct avenue for liabilty from piercing the veil. We'll examine this in the context of franchises, but agency can arise in a variety of other situations.