D. Mere Instrumentality
The term "instrumentality" is at times used interchangeably with "alter ego." Indeed, courts will often refer to the two terms together, finding a party to be both an "alter ego and an instrumentality" of the party for which substantive consolidation is sought.126 The Fifth Circuit has explained that where a party was "so involved with [the] debtor that it is in fact actively managing the debtor's affairs, then the quantum of control necessary to support liability under the 'instrumentality' theory may be achieved."127 The test for instrumentality in Kentucky requires a showing that an entity is merely the instrumentality of some other party who has exercised control over the entity in a way that harms or defrauds another party, which causes that party some unjust loss.128 Other courts have considered factors in applying the instrumentality doctrine such as inadequate capitalization, noncompliance with corporate formalities, complete domination and control, excessive fragmentation, nonpayment of dividends, insolvency of the debtor corporation, siphoning of funds by the dominant shareholder, nonfunctioning of other officers or directors, and absence of corporate records.129 However, the Supreme Court of North Carolina emphasized that "these are merely factors to be considered to determine whether sufficient control and domination is present to satisfy the first prong of the three-pronged rule known...
