Legal protection provided to a corporation
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I am a widow and have no share in this corporation, however my mother-in-law and her three remaining sons are on the Board of Directors. The sons have been taking money under the guise of 'shareholder loans'...now there is nothing left. My mother-in-law has suffered from severe depression and is an alcoholic since my husbands passing -- She also has quite a bit of personal assets. The creditors want to sue her personally. Can they? What happens to the corporation?
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Solution Summary
The problem involves a personal situation, but the facts and circumstances are not unusual in the business world. The solution explains the protection offered by a corporation, but then details various ways in which the protection can be lost. Some of the possible consequences are discussed together with suggestions as to how to proceed in an attempt to protect personal assets.
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Your mother in law has a real problem on her hands. First, let me give you some facts based in corporate law.
A corporation is a legally separate entity, and is sometimes referred to as an 'artificial person' under the law. What that means is that it is a separate and distinct entity apart from its shareholders. A corporation signs its own contracts, has it own assets and debts, again separate from the owners.
That's the law, but there are ...
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