Legal Question in Business Law in California

Re: corporate law

When a corporation is dissolved, or when it is insolvent, its insiders (large stockholders, directors and high-ranking officers) come under legal scrutiny for acts which might indicate unfair preferences to themselves and at the expense of third-party creditors such as suppliers, employees, lenders, judgment creditors and tax collectors.

A variety of legal theories come into play, not including "piercing the corporate veil" a/k/a "alter ego," which is also a theory of personal liability for corporate obligations, but is not special to the dissolution or insolvency scenarios. One of the theories is I believe called the "trust fund theory" and it holds that the insiders are involuntary trustees of corporate assets for the benefit of the creditors. Another common-law theory is that these are fraudulent transfers.

There are also statutory restrictions on payments to insiders such as the limitation on distributions set forth in the dissolution provisions of the Corporations Code, sections 2000 to 2011; see especially 2004, 2009 and 2011. Preferential distributions to insiders may also be statutory fraudulent transfers with respect to some creditors under the Uniform Fraudulent Transfers Act, Civil Code sewctions 3439 to 3439.12.

Re: corporate law

If there are grounds to sue you individually, it doesn't matter if the corp is dissolved or not. If that happens, feel free to contact me for defense, if there isn't corp E&O insurance that covers you. If you don't know what that means, then you probably don't have the coverage. If you kept the corp conduct and records in compliance with the law, you shouldn't worry too much.

Re: corporate law

Yes.