Question

Wilson, Bart, and Susan Fields decide to set up a corporation together called Fields, Inc. They follow the correct procedures for establishing their corporation, but once it is established they do not hold regular corporation meetings. Because they are all related, they just conduct their communications and business related to Fields, Inc., at their family gatherings and over casual phone conversations. When Fields, Inc., is sued for failing to pay some outstanding debts, the court likely will:

Answer 1

pierce the corporate veil due to the failure to hold required corporation meetings.

Step-by-step explanation:

Piercing the Corporate Veil is a legal term used to refer to the situation in which a court holds the shareholders liable for the debts that occurred.

When a company opt for limited liability, while creating a business, the debts incurred will be limited to the assets invested in the business. But sometimes, a court may hold the shareholders or the owners liable for the debts incurred.

This may happen to several reasons stated in the law, of them one is, Failure to observe corporate formalities. In this, if a company fails to observe certain formalities that were promised to follow initially, a court can hold the owners liable.

In the given case, Fields, Inc., will be held for piercing the corporate veil as they failed to observe regular corporation meetings.

So, the correct answer is Piercing the Corporate Veil.