In re Phillips
In In re Phillips (Colo. 2006) 139 P.3d 639, the court imposed a requirement that "innocent shareholders and creditors be adequately protected before outside reverse piercing is appropriate under Colorado law."
Because piercing the corporate veil is an extraordinary remedy, the court also required the trial court to consider alternative, adequate remedies (such as claims for conversion, fraudulent conveyance of assets, respondeat superior, and agency) before permitting outside reverse piercing: "When a less invasive, adequate remedy is available, outside reverse piercing is discouraged." (Id. at p. 647.)
A variant of the reverse piercing theory, sometimes called "outside" or "third party" reverse piercing, occurs when a third party outsider seeks to reach corporate assets to satisfy claims against an individual shareholder. (In re Phillips, supra, 139 P.3d at p. 645.)