Full question:
How is it possible for theft charges against me when the product purchase claim was against a corporation, the corporation went out of business, the owner took funds out of his personal bank account to cover the charge back to the corporate bank account.
- Category: Corporations
- Date:
- State: Maryland
Answer:
In some situations, individuals can be held personally liable for corporate debts under the 'alter ego' theory. This legal concept allows courts to 'pierce the corporate veil' when there is no clear separation between the individual and the corporation. Whether this applies depends on specific facts of the case.
Typically, a person's personal assets are protected from a corporation's liabilities, unless they acted beyond their authority, breached a fiduciary duty, or the corporation is not truly separate from their personal dealings. However, if a corporation engages in wrongdoing, such as fraud or failing to meet financial obligations, the individuals behind it may lose this protection.
Courts may hold shareholders, officers, or directors personally liable if they have committed fraud, acted illegally, misrepresented facts, failed to follow incorporation requirements, commingled personal and corporate funds, or if the corporation is undercapitalized. This is known as piercing the corporate veil.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.