1. What is piercing the corporate veil?
This is a situation whereby an individual from a corporation is held liable for the debts of the corporation by the court. It overlooks the principle that holds the corporation solely liable according to contract or tort (Miller & Cross, 2013).
2. What are the factors that a court considers to pierce the corporate veil?
- Whether the owner came up with the corporation with the objective of his own personal gains.
- When a corporation transfers its assets to another corporation to avoid liability.
- When the owner transfers his property to another corporation to avoid paying personal judgment (Miller & Cross, 2013).
- When the owner transfers his property to a corporation which he controls in order in order to conceal assets from creditors (Miller & Cross, 2013).
3. What is the alter-ego theory?
This is where the owner of a corporation carries out his task in the corporation with this objective in mind; his own personal gains. This kind of an individual should not be protected under the liability protection of the corporation in case of debt or any wrongful act leading the case to court.
4. You represent Laker Express, please make the argument that the trial court had it wrong and that there was a good case to pierce the corporate veil.78
Smith services, Inc was a corporation exclusively owned by Tony Smith. Bear Inc. owned and operated Lakers Express, a fueling place in Kentucky. Lakers Express issued all invoices to smith services bearing in mind that there was no written contract indicating who was liable on the account in the event of failure to pay. Later Smith dissolved the corporation and continued to run his business as one and only proprietorship. Lakers Express sued the Smith services to collect on dept but it had no resources. This led them to suing Tony smith individually and asked the court to pierce the corporate veil. They claimed that smith was using the corporate form to defend himself and also he was involved in fraud. The case was dismissed (Miller & Cross, 2013).
The court decision was not fair since it was supposed to pierce the corporate veil. Tony Smith move to dissolve the corporation and continue with his own business is a clear indication of greed and fulfillment of his own personal interest. A condition known as alter –Ego arises, whereby it is a situation that occurs after an individual acts in the interest of his personal gains. Under this situation, the owner is out of protection of the corporation and should be held solely liable for his own wrongful acts. The court should there for have pierced the corporate veil. Tony Smith transferred the assets from smith services to business he totally controlled with the aim of concealing the assets from creditors. This is another factor that the court never considered. With these factors mentioned above, the court was wrong in its ruling.
Reference
Miller, R. L., & Cross, F. B. (2013).Business law: alternative edition text and summarized cases : legal, ethical, global, and corporate environment (12th ed.). Mason, Ohio: South-Western Cengage Learning.
