Question

Elliot is suing Acme, Inc., for a breach of contract, but because Acme has very little in assets, he asks the court to pierce the corporate veil and hold the officers personally liable. In which of the following situations would the court likely approve Elliot’s request?

a. The corporation was under-capitalized from the beginning, and never had sufficient assets to operate as a viable business.
b. The officers make their decisions based on information presented to them, but unknown to them is the fact the information is incorrect.
c. The officers loaned money to the corporation in an attempt to delay any adverse actions.
d. The corporation has struggled to make a profit from the beginning.

Answer 1

Answer: The court would likely approve Elliot's request in the following situation: The corporation was under-capitalized from the beginning, and never had sufficient assets to operate as a viable business.

Under the given scenario i.e. for a breach of contract , the condition will apply if the corporation i.e. Acme Inc. was under-capitalized from the start, and they never had predominating assets to work as a viable organization.

Therefore the correct option is (a)