Alter Ego Liability
Alter Ego Liability
- Alter Ego Liability is the legal theory by which plaintiffs' attorneys argue that
since a particular corporation is really treated as the alter ego of one or
more of its shareholders or officers rather than as a separate entity, those
shareholders and officers should be personally liable for the debts and
obligations (and jury awards) owed by the corporation. A corporation is supposed
to be treated as a separate entity from its shareholders and officers. However,
sometimes owners of a private corporation do foolish things like commingle
corporate funds with personal funds in the bank accounts, use corporate funds to
directly pay a shareholder's late mortgage payment, pay corporate debts
directly out of personal funds (personal checking account, credit cards, etc.)
without Board approval of the reimbursement of the expenses or of a loan of the
funds to or from the corporation. A successful alter ego liability allegation
means that each of a corporation's officers or shareholders can be named
in the lawsuit and held personally liable for all debts of the business, as if
the corporation never
existed.
During a lawsuit, plaintiff's attorneys will take corporate meeting minutes from you during discovery to prove that the corporation is not truly a separate legal entity from its officers and shareholders. How?
Deficient corporate minutes can demonstrate that the officers and shareholders repeatedly acted without the authorization of a corporate resolution.
Like commingling corporate and personal money, actions without required corporate resolutions evidence a disregard for corporate formalities that helps attorneys to "pierce the corporate veil" (i.e., overcome the corporate shield against personal liability).
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
Copyright © 2003-2010 LawVantage.com, LLC. All rights reserved.
Important LawVantage.com, LLC and its website, CorporateBoardMinutes.com, do not render any legal, accounting or other consulting advice.
For legal advice, you should always consult with a qualified attorney-at-law.
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During a lawsuit, plaintiff's attorneys will take corporate meeting minutes from you during discovery to prove that the corporation is not truly a separate legal entity from its officers and shareholders. How?
Deficient corporate minutes can demonstrate that the officers and shareholders repeatedly acted without the authorization of a corporate resolution.
Like commingling corporate and personal money, actions without required corporate resolutions evidence a disregard for corporate formalities that helps attorneys to "pierce the corporate veil" (i.e., overcome the corporate shield against personal liability).
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
Copyright © 2003-2010 LawVantage.com, LLC. All rights reserved.
Important LawVantage.com, LLC and its website, CorporateBoardMinutes.com, do not render any legal, accounting or other consulting advice.
For legal advice, you should always consult with a qualified attorney-at-law.
Website development by
Vine Design.