ACC-205 Business Law - Worksheet 18.3: Piercing the Corporate Veil & Corporate Directors and Officers

Officers and directors have a special relationship with the corporation and its shareholders and are called:

fiduciaries

Directors and officers have a duty to act (blank), to exercise the care that a(n) (blank) person would exercise in similar circumstances, and to do what the director or officer believes is in the (blank) of the corporation.

in good faith ordinarily prudent best interest

1. Quorum 2. Inside directors 3. Outside directors

1. The directors required to make a decision or take official action. 2. The directors who also are officers of the corporation. 3. The directors who do not hold management positions at the corporation.

Directors are hired by the shareholders through an interview process.

False

Corporate officers are hired by the directors.

True

To pierce the corporate veil is to expose the shareholders to personal liability.

True

Directors and officers may be liable for the actions of corporate employees under their supervision, as well as for their own torts and crimes.

True.

Individual corporate directors (blank) have the ability, as agents of the corporation, to bind the corporation.

do not

The business judgment rule states that directors and officers:

are immune from liability for business judgments that turn out poorly, so long as they exercised reasonable care.

The type of corporation most at risk for piercing the corporate veil is the:

close corporation

When a corporation enters into a contract or engages in business with another corporation in which one of the board members has a personal interest, that board member must fully (blank) the conflict and (blank) voting.

disclose abstain from