13 May MAY SUZIE ASSERT THE LIMITED LIABILITY OF THE CORPORATE FORM AS A DEFENSE?
Liability for breach of duty of care to the corporation
Greg, Kim, Phil, and Bob each own 20 percent of the shares
of a company and serve as the board of directors of the company, Home Health,
Inc. George is also a 20 percent shareholder, but he is not a member of the
board of directors. When Bob dies, his wife Suzie inherits his shares of stock
that were then worth $100,000, and replaces him on the board. Unfortunately,
she is so grief-stricken that she is completely inattentive to corporate
affairs. During this period, Greg, Kim, and Phil extend loans to themselves
totaling $250,000 from corporate funds that they never pay back. When George
discovers that Home Health, Inc. is insolvent, he sues Suzie for breach of her
duty of care to the corporation. Discuss Suzie’s liability. May Suzie assert
the limited liability of the corporate form as a defense?Liability for breach of duty of care to the corporationGreg, Kim, Phil, and Bob each own 20 percent of the shares
of a company and serve as the board of directors of the company, Home Health,
Inc. George is also a 20 percent shareholder, but he is not a member of the
board of directors. When Bob dies, his wife Suzie inherits his shares of stock
that were then worth $100,000, and replaces him on the board. Unfortunately,
she is so grief-stricken that she is completely inattentive to corporate
affairs. During this period, Greg, Kim, and Phil extend loans to themselves
totaling $250,000 from corporate funds that they never pay back. When George
discovers that Home Health, Inc. is insolvent, he sues Suzie for breach of her
duty of care to the corporation. Discuss Suzie’s liability. May Suzie assert
the limited liability of the corporate form as a defense?
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