Asked by Elizabeth Steinke on Jun 22, 2024
Verified
Rex forms Shell Company to assume debts that he does not wish to pay. The firm is not intended to make a profit, and Rex does not provide it with sufficient capital. This most likely warrants
A) tricking Rex into disclosing Shell's true purpose to Rex's creditors.
B) recognizing Shell as a de facto corporation.
C) piercing Shell's corporate veil.
D) requiring Rex to commingle his personal funds and Shell's funds.
Corporate Veil
A legal concept that separates the identity of a corporation from its shareholders, protecting them from being personally liable for the company's debts or legal obligations.
De Facto Corporation
A business that operates as a corporation without formal legal acknowledgment but is treated as such for some purposes.
- Gain insight into the notion and effects of the corporate veil, including instances that might result in its disruption.
Verified Answer
AM
Ashish MittalJun 26, 2024
Final Answer :
C
Explanation :
Piercing the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. In this case, since Rex is using the shell company to avoid debts without intending to make a profit and not providing sufficient capital, it could be seen as an abuse of the corporate form, justifying the piercing of the corporate veil to hold Rex personally liable for the debts.
Learning Objectives
- Gain insight into the notion and effects of the corporate veil, including instances that might result in its disruption.
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