Risky Business: Shell Games and Substantive Consolidation

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by Jennifer L. Villier, JD | Legal Education Faculty, WealthCounsel

Business planning attorneys routinely counsel clients on the risks of veil piercing. Failing to operate a business as a separate entity may lead courts to pierce the veil and use the owner’s personal assets to satisfy the business debts.

Substantive consolidation is a close cousin of veil piercing. A recent Bankruptcy Court case, In re Cameron Construction & Roofing Co., Inc., serves as a reminder that an entity formed for asset protection purposes must be operated as a legitimate, separate entity from its owner and any affiliated entities, or it may risk substantive consolidation in a bankruptcy proceeding.

Learn more about substantive consolidation, this case, and how you can effectively counsel your small business clients.