Sullivan CHBO SP23 Questions and Answers

Barth v. Barth Ans- Majority rule, however, majority owners have fiduciary duty to minority owners and business itself. In general, proper procedure for minority to challenge majority is a derivative action on behalf of the business. Bedrock Principle of Limited Liability Ans- Unless otherwise provided in the articles of incorporation, a shareholder of a corporation is not personally liable for the acts or debts of the corporation except that the shareholder may become personally liable by reason of the shareholder's own acts or conduct. Piercing the Corporate Veil Ans- A doctrine that says if a shareholder dominates a corporation and uses it for improper purposes, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations Aronson Eight factors for piercing the corporate veil Ans- (1) undercapitalization. (2) absence of corporate records. (3) fraudulent representation by shareholders or directors. (4) use of the corporation to promote fraud, injustice or illegal activities. (5) payment by the corporation of individual obligations. (6) commingling of assets and affairs. (7) failure to observe required corporate formalities. (8) other shareholders acts or conduct ignoring, controlling, or manipulating the corporate form. De facto corporations Elements Ans- A defectively formed cor