Asked by Alexandra Rosen on May 18, 2024
Verified
Corporate shareholders will most likely be held personally liable for the firm's debts if they
A) insist on separating their personal interests from those of the firm.
B) refuse to transfer their shares to dilute control of the firm.
C) encourage the firm to unsuccessfully enter a new market.
D) use the firm to perpetrate a fraud.
Perpetrate A Fraud
The act of intentionally deceiving someone or a group in order to gain an unfair or illegal advantage, often financial.
Personally Liable
A legal term referring to an individual's responsibility to settle a debt or legal judgment from their personal assets.
- Acquire an understanding of the corporate veil's concept and implications, alongside the situations in which it can be breached.
- Comprehend the legal and ethical responsibilities of corporate officers and directors, including fiduciary duties and liability issues.
Verified Answer
TB
Tommy BandyMay 20, 2024
Final Answer :
D
Explanation :
Corporate shareholders are typically protected from personal liability for the firm's debts due to the principle of limited liability. However, if shareholders use the corporation to commit fraud, courts can "pierce the corporate veil" and hold them personally liable.
Learning Objectives
- Acquire an understanding of the corporate veil's concept and implications, alongside the situations in which it can be breached.
- Comprehend the legal and ethical responsibilities of corporate officers and directors, including fiduciary duties and liability issues.
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