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15 Cards in this Set
- Front
- Back
What corporate privilege was abused in Minton? |
limited liability |
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what are three factors that would support piercing the corporate veil? |
commingling, inadequate capitalization, active participation in corp. affairs |
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what could have substituted for adequate capital and probably protected Cavaney from personal liability? |
insurance |
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other than limited liability and insurance, what could have protected Cavaney from personal liability? |
indemnification - if company still had assets to pay a judgment against him |
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if asked what the first 2 things a new corporate director needs to do, you would answer: |
ensure that 1) the director is covered by insurance and 2) the corporation will provide indemnification |
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T or F: inadequate capitalization alone generally will be enough to pierce the corporate veil |
false - something more is usually required, such as active participation in management |
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T or F: succesful piercing claims generally involve closely held businesses or shareholders that are entities |
true |
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T or F: piercing claims virtually never succeed against individual shareholders of widely held firms |
true |
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why might you advise a client to place assets of a single enterprise into multiple corporations? |
segregating the assets protects them against claims made against other entities |
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what piercing risk may be created when assets are spread among multiple corporations? |
each corp. may be inadequately capitalized because their assets are spread among different entities |
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a 100% shareholder of 2 corp. would prefer that |
one corporation to be found liable for the obligations of the other - the owner's personal assets include the stock of both corporations |
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T or F: when an enterprise has many shareholders, liability can practically be limited by creating many independent entities |
false - would be too cumbersome with many shareholders |
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when an enterprise has many shareholders, what structure can practically provide limited liability? |
a parent-subsidiary structure where the shareholders own interest only in the parent |
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T or F: one benefit of the parent-subsidiary structure is that the veil can never be pierced |
false - the parent is like any shareholder, and the veil can be pierced to a parent/shareholder |
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T or F: one benefit of the parent-subsidiary structure is that the veil can never be pierced to the parent's shareholder |
false - under the right facts, you can keep piercing through parent after parent and get to the ultimate shareholders, although unlikely that piercing will extend to a large number of natural person shareholders |