Recog. & Disregard of Corporateness
- Can't Really Have Defectively Incorp'ed Corp's Now
- Defective Corp's From Before
- Ct Upholds De Jure / De Facto Corp's
- De jure is min. failure 2 observe formality
- De facto is sig. noncompliance btu still corp. if good faith
attempt 2 comply
Disregard of Corp.
- Stt. Exception 2 Limited Liab. of SH
- NY Corp. Code §630
- Ten largest SH's liab. 4 ee'swage claims against corp.
- But if incorp. somewhere else, elim's this
- Piercing Corp. Veil: C/L Exception
- Hold SH Pers'ly Liab. 4 Claims Against Corp. By Policy
- Tort claim, then claimant is invol. creditor
- K claim, then claimants knew / may have known
- Factors 4 Analysis
- Observing corp. formality
- Mingling of asset
- Tort Cases
- Enterprise entity theory only pierces hz'ly (Carlton,10 cabs)
- Stand's 4 piercing
- SH treat corp. asset as own (Carlton)
- Disjunctive / corp. officer hold out as pers'al liab.
- Inadeq. cap. + active involvement (Minton, pool) but weak
- Undercap. can B met by min. liab. ins., lwring moral hazard
- Dissent (Carlton) wants suff. $ 2 meet rsbl foreseeable needs
- K Cases
- Should B harder 2 pierce b/c had opp. 2 protect itself so
A/R w/subst'l trxn, but cases not make distinction
- Could've not done busi.
- Check out fin. stmt
- Pers'al guarantee
- Stand. 4 Piercing: Disregard corp. entity when no mind, will,
existence of its own 4 busi. conduit
- Kinney Stand. (buffer corp.)
- Unity of int. in ownership so corp. not sep. by looking @
cap., corp. formalities, & causal cnxn btwn no formalities
& harm 2 P
- A /R b/c capacity 2 protect itself (only banks fin'ly sophisticated)
- Sea Land (pierced)
- Undercap. / no cap. is indispensable factor
- Absence of formalities , not sep, & comb corp. asset
- Close Corp.
- Env. Not Conducive 4 Observing Corp. Formalities
- DL §354 is trend 2 dispense w/formalities, unlike ct's
- Still imp. formalities like min's 4 tax purposes
- Never backdate min's but memorialize
- Parent Subsidiary
- Parent Corp. Owns Stock Other Corp's, Subsidiaries
- Common not 2 observe formalities b/c think subs not distinct
- Fin. Stmt's Intro'ed
- Balance Sheet
- Asset - Liab. = Equity / Bkvalue which is only snapshot
- Asset on left showing what's actually in busi. but in historical
- Liab. of creditors & equity of SH on rt. showing claims
- Like 2 see low ratio of creditor claim 2 SH claim 4 worthy
- Income Stmt
- Income = Gross Rev. - Cost
- Perf. over def'ed per. of X
Subordination of SH Claims
- Creditors Paid 1st
- Equitable Subord. Doc.
- When person is creditor & SH, equitably subord. so creditor/SH
will B last 2 claim
- Not holding anybody pers'ly liab.
- Adeq. cap. of corp. @ X loan made such that if no rsbl 3rd
party creditor would loan, then treat $ by SH as equit. contrib.
- If loan is same proprotion as stock holding, then equit. contrib.
- If loan then equity cap., looks better
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Ms. Haeji Hong
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