We learned that piercing the corporate veil refers to when the court holds shareholders personally liable for the debts of the corporation. Courts pierce the corporate veil in a few specific circumstances. These include; failure to observe formalities, commingling assets, inadequate capitalization, and committing fraud. This particular case falls under inadequate capitalization section. Kabul Incorporation failed to raise enough capital, through debt or equity, to give Alarmaway a "fighting chance." Therefore, Kabul Inc., the shareholder, would be required to pay corporate obligations personally. We also studied that if the corporation does not have sufficient capital, it must buy insurance to protect itself against tort liability, for instance. If a damaged tort victim (i.e. AUAF) is sent away empty-handed, courts will most likely hold the shareholder (i.e. Kabul Inc.) liable. Furthermore, the case also acknowledged that Alarmaway had some profitable months after which its assets declined to a meager $10,000. Even after witnessing this radical deterioration, Kabul Inc. did not even bother to obtain any liability insurance or keep a minute book to deal with the situation. Rather, it chose not to act like a corporation and consequently terminated doing business. So, yes, the court should pierce the corporate veil and hold Kabul Inc. liable for Alarmaways debt.

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