Home > Research Legal Advice > Litigation > Can a Presiding officer of corporation sole lose his personal assets
Asked 7 months ago - San Mateo, CA
FlagIf the corporation sole can't make good on a debt but is trying to make payment s, can the creditor attach a lien on the personal assets of the presiding officer not titled to the corporation sole? Thanks
Generally, officers and shareholders' assets are protected from the creditors of a corporation. A corporation is its own person under the law and it is responsible for its own debts. There are exceptions, however, particularly if a sole officer/shareholder does not follow corporate formalities. You should seek an attorney who is knowledgeable about corporations and religious corporations, in particular.
The possibility exists, yes. If the plaintiff is able to "pierce the corporate veil" by proving an alter ego theory, the presiding officer's assets might be at risk.
In order to establish personal liability against the individual officers and shareholders, the plaintiff would have to prove that the corporation is the alter ego of the individuals. The alter ego doctrine can be used to "pierce the corporate veil" to obtain personal liability against individuals who own and control a corporation. In order to raise an alter ego allegation, a plaintiff must provide sufficient facts to show that:
(1) the corporation is not only influenced and governed by a person, but also that there is such a unity of interest and ownership that the individuality, or separateness, of such person and the corporation has ceased and
(2) an adherence to the fiction of the separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote injustice.
(Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 837.)
Other factors which have been described in the case law include commingling of funds, inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. No one characteristic governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied.
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