Corporate Veil Piercing, No; Setting Aside Preferential Transfers, Yes

A new decision of the New York Appellate Division, Second Department, reversed a decision after a bench trial in which the judge pierced the corporate veil of the defendants, but affirmed its setting aside certain preferential transfers made to a corporate insider–Parabit Realty, LLC v Levine, 2026 NY Slip Op 02663 (2d Dep’t Decided Apr. 29, 2026).

The Corporate Veil

As I explained in Piercing Corporate Veil Without Establishing Fraudulent Conduct, the “corporate veil” refers to how doing business through a legal entity, such as a corporation, limited liability company or limited partnership can limit the legal obligations and debts to the entity itself rather than imposed upon its owners or affiliated companies. Courts “pierce” that corporate veil, however, and extend liability to owners or affiliated entities where the formalities of the entity are not followed and the result effectuates some fraud or other unfair wrongdoing to those with whom the entity has dealt.

Veil piercing can also be imposed under what is known as the “alter ego” theory where the legal status and separate existence of an entity is disregarded so as to really amount to the same entity or person.

Read the full blog post here.