To enact section 2307.36 of the Revised Code to codify the elements of the common law cause of action for "piercing the corporate veil."
SB 146 would add a new section to the Ohio Revised Code that codifies the common-law doctrine of “piercing the corporate veil” when a governmental entity seeks to collect damages or penalties from a person behind a business entity. The bill defines key terms such as “covered entity,” “covered person,” “affiliate,” and “governmental entity,” and states that owners, members, officers, directors, and certain affiliates generally are not liable for a company’s debts or penalties unless a statutory exception applies.
Under the bill, a governmental entity may hold a covered person liable only if liability is expressly provided elsewhere in the Revised Code or if the government proves the traditional veil-piercing elements: that the person so controlled the entity that it had no separate existence, used that control to commit fraud, an illegal act, or a similarly unlawful act against the government, and caused injury or unjust loss. The bill also lists relationships and activities that, by themselves, do not establish the kind of control or misconduct needed for veil piercing, such as providing shared services, leasing assets, making loans, guaranteeing obligations, overlapping ownership or management, paying dividends, or serving as an LLC manager.
The bill places the burden of proof on the governmental entity for every element of a veil-piercing claim and applies to new claims filed on or after the effective date, as well as some pending claims without a final appealable order. It also states that it does not create a new cause of action beyond existing common law and does not affect the liabilities of a general partner in a limited partnership. In practical terms, the measure would strengthen predictability for business owners and affiliated persons while preserving government access to veil-piercing remedies in cases of proven abuse.
The available vote history shows strong support in the Senate, with unanimous favorable committee action and unanimous passage on the Senate floor. No committee transcript was provided, so there is no recorded debate to indicate significant opposition or amendments in the materials supplied. Overall, the bill appears to have been received as a clarifying, pro-business codification of existing doctrine rather than a controversial expansion of liability.
The bill would create new statutory language in Chapter 2307 of the Revised Code governing when a governmental entity may disregard the separate legal existence of a corporation, LLC, limited partnership, or similar entity to reach owners, officers, directors, members, or affiliates. It would not broadly change private-party veil-piercing law on its face, but it would specifically regulate claims brought by state and local governmental entities and would require them to satisfy the codified elements and burden of proof. The bill also preserves existing liability rules for general partners and applies to certain pending cases, which could affect ongoing litigation involving government collection of damages or penalties.
The recorded sentiment is strongly favorable. The Senate committee vote was unanimous, and the full Senate passed the bill 32-0, suggesting broad bipartisan agreement or at least no visible opposition in the available record. The absence of transcripted debate limits insight into detailed arguments, but the vote pattern indicates the bill was viewed as a technical codification and clarification measure rather than a divisive policy change.
The main policy tension in the bill is between protecting the corporate form for owners and affiliates and preserving government enforcement tools against abuse. Supporters are likely to favor the bill’s clearer standards, burden-of-proof requirement, and list of relationships that do not alone justify veil piercing, because these provisions reduce uncertainty and limit derivative liability. Potential critics would be governmental entities or enforcement advocates concerned that the bill could make it harder to recover damages or penalties from individuals behind closely held entities, especially by narrowing when control and misconduct can be inferred. The bill’s explicit focus on claims by governmental entities, rather than all veil-piercing claims, is also a notable point of distinction.