Corporations, of course, afford protection to shareholders for corporate debts because the corporation is a person separate from its shareholders. To hold shareholders responsible, a creditor must pierce the corporate veil. It is not enough, however, for a court to simply wish to prevent an evasion of a legal obligation: “The common thread running through the Maryland cases – as stated earlier – is that the corporate entity will be disregarded only when necessary to prevent fraud or to enforce a paramount equity.” Bart Arconti v. Ames-Ennis, 275 Md. 295, 312, 340 A.2d 225, 235 (1975). The Court of Appeals in Hildreth v. Tidewater Equipment Co., 378 Md. 724, 735-6, 838 A.2d 1204, 1210-11 (2003) addressed the criteria for finding a “paramount equity”:
“Although there appears to be no universal rule as to the specific criteria that courts will consider in determining whether to apply the doctrine, Fletcher observes that some of the factors commonly considered, when dealing with a single corporation, are (1) whether the corporation in inadequately capitalized, fails to observe corporate formalities, fails to issue stock or pay dividends, or operates without a profit, (2) whether there is commingling of corporate and personal assets, (3) whether there are non-functioning officers or directors, (4) whether the corporation is insolvent at the time of the transaction, and (5) the absence of corporate records. Id.
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There is no support in this record for basing personal liability on the ‘alter ego’ doctrine. With respect to the more general factors mentioned by Fletcher, there is no evidence that Hildreth exercised such complete domination over HCE-NJ to warrant a conclusion that the corporation ‘had no separate mind, will or existence of its own.’ There is no evidence that HCE-NJ was undercapitalized, that corporate formalities were not observed, that the corporation operated without a profit, that there were non-functioning officers or directors, that the company was insolvent when it entered into the arrangement with Tidewater, that there were no or inadequate corporate records.”
As with the clear majority of cases, the Court refused to pierce the corporate veil in Hildreth.