Piercing the Corporate Veil of the Special Purpose Vehicles: Not as Easy as It Might Appear (2025 Edition)

Stephen B. Selbst | Herrick, Feinstein LLP

Stephen Selbst is the co-chair of Herrick’s Restructuring & Finance Litigation Department. He has more than 30 years of experience representing debtors, creditors, official committees, distressed investors and asset purchasers in bankruptcies and out-of-court restructurings. Stephen advises clients from a wide range of industries, including financial services, telecommunications, government agencies and real estate. A skilled commercial litigator, Stephen also has significant experience in district and state courts, where he regularly represents clients in separate litigation arising out of bankruptcy. He also advises clients on structured finance and derivative transactions.

He is a frequent lecturer on bankruptcy and restructuring topics and has published articles and book chapters on bankruptcy-related topics. He has been frequently quoted in newspaper articles on insolvency related topics and has appeared on CNBC. Stephen also has experience representing lenders in financing transactions, where he has handled various forms of credit facilities, including asset-based loans, cash flow loans, leveraged lease transactions, note purchase agreements and high-yield bond issues.

I. What is a Special Purpose Entity (SPE) | 2:00pm – 2:30pm

• The origin, characteristics, and uses of Special Purpose Entities (SPEs)
• Typical structure
• Types of transactions were used

II. What is piercing the corporate veil | 2:30pm – 3:00pm

• Explanation of the legal doctrine
• Piercing the veil can arise in state law claims and federal bankruptcy cases
• Why SPEs are susceptible to veil piercing
• Factors that could lead to piercing the veil with SPEs
  • Undercapitalization
  • Commingling of funds
  • Lack of corporate formalities
  • Fraudulent activity

Break | 3:00pm – 3:10pm

III. Discussion of state law claims and cases | 3:10pm – 3:30pm

IV. Discussion of substantive consolidation and cases | 3:30pm – 3:50pm

V. Protecting against veil piercing | 3:50pm – 4:10pm

• Proper documentation
• Strict adherence to corporate formalities
• Adequate capitalization
• Compliance with separateness covenants
• Acknowledgement in documents