Shareholders - mgmt + liability

Question 1

close corp (c corp)

Answer 1

few SH + not publicly traded

Question 2

do SH run day-to-day operations of corp

Answer 2

no thats the role of BOD

unless AOI says otherwise

Question 3

SH duty in c corp

Answer 3

SH have a fiduciary duty to other SH

Question 4

can SH be held liable for debts

Answer 4

NO

personally liable ONLY IF pierce corporate veil AND its a closed corp

Question 5

piercing corporate veil (PCV)

Answer 5

To PCV and hold SH personally liable

1. SH must have abused privilege of incorporating
2. fairness must require holding them liable

Question 6

scenarios which justify PCV

Answer 6

1. Alter ego
2. undercapitalization
3. fraud, avoidance of existing obligations or evasion of statutory provisions

Question 7

alter ego

Answer 7

SH ignores corporate formalities and acts as if corp is his alter ego instead of SH being a part of the corp → this results in some basic injustice and the ct is justified in PCV

ex: SH treat corporate assets as their own, commingle their money with corporate money etc

Question 8

undercapitalization

Answer 8

PCV can be pierced when corp is inadequately capitalized so at time of formation not enough unencumbered capital to cover prospective liabilities

ct more willing to PCV for a tort victim over a K claim