Worksheet 18.3: Piercing the Corporate Veil & Corporate Directors and Officers

Directors are hired by the shareholders through an interview process. T/F

False

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

T

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

T

Outside directors

The directors required to make a decision or take official action

Inside directors

The directors who also are officers of the corporation

Quorum

The directors who do not hold management positions at the corporation

Corporate officers are hired by the directors. T/F

True

The business judgment rule states that directors and officers:

are immune from liability for bad business judgments so long as they exercised reasonable care

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 _________________ the conflict and _______________________ voting.

disclose abstain from

Individual corporate directors ________________ have the ability, as agents of the corporation, to bind the corporation.

do not

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 selectin good _________________ , to exercise the care that a(n) __________________ person would exercise in similar circumstances, and to do what the director or officer believes is in the ____________________ of the corporation.

in good faith ordinarily prudent best interest

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

close corporation