4 ms·

Corollary: Even if you take every reasonable legal precaution, there's still a possibility that you can be held liable once the class action lawsuit is filed.

• andrewfong 13y ago
  Yes, but who would pay if you won? The corporation's assets have been stolen, and presumably there aren't enough left over to cover the shortfall (hence the closure of the site). Moreover, unless they screwed up their corporate formalities, the individual shareholders should be protected from this type of loss. Limited liability is one of the main reasons why corporations exist in the first place.
  • dragonwriter 13y ago
    > Moreover, unless they screwed up their corporate formalities, the individual shareholders should be protected from this type of loss. Corporate formalities alone don't prevent piercing the corporate veil.
    • andrewfong 13y ago
      Yes, but it's really hard to pierce the corporate veil if all the formalities are in place. Negligence alone won't let you pierce the veil. Unless the shareholders effectively embezzled the corporation's assets, I don't see how you get around it.
      • dragonwriter 13y ago
        > Negligence alone won't let you pierce the veil. Sure, but undercapitalization alone can with certain types of creditors, and gross undercapitalization can be a significant factor in favor of piercing the veil in other cases. And actively concealing a known "leak" of funds held in trust for customers arguably goes far beyond mere negligence.
        • tptacek 13y ago
          Point of order: negligence alone routinely "pierces the veil", doesn't it? It's a tort.
          • dragonwriter 13y ago
            > Point of order: negligence alone routinely "pierces the veil", doesn't it? Not alone, it doesn't routinely. > It's a tort. Anything that produces civil liability is a tort. It wouldn't be much of a veil if anything that was a tort routinely pierced it.
            • tptacek 13y ago
              I'm definitely not trying to be argumentative, but as I understand it, corporate limited liability doesn't shield individuals (including agents of the company) from tort liability. Also, it's not really true that anything that produces civil liability is a tort, is it? Civil liability also arises from contract law.
              • dragonwriter 13y ago
                > I'm definitely not trying to be argumentative, but as I understand it, corporate limited liability doesn't shield individuals (including agents of the company) from tort liability. That's not about piercing the veil (which protects shareholders from liabilities incurred by the company), that's just individual liability independent of the corporate existence of corporate liability. And your right, but negligence liability requires that the individual agent owes you a duty of care and failed it; even in the case where corporate negligence toward a harmed party is easy to establish, individual negligence of a particular corporate agent toward the same party may be much harder to establish. And, again, such liability is a completely different issue then the corporate veil. > Also, it's not really true that anything that produces civil liability is a tort, is it? Civil liability also arises from contract law. True, but I think the general point still stands that the corporate veil would be pretty flimsy to start with if it didn't generally include protection from liability arising through tort.