Harold and Dorothy own all the shares of Ace Corporation. Robert, Ace’s landlord, sued Ace for...

Harold and Dorothy own all the shares of Ace Corporation. Robert, Ace’s landlord, sued Ace for unpaid rent and received a $10,000 judgement against Ace. When Robert tried to collect on the judgement, he discovered that Ace had no assets. However, upon further investigation, Robert discovered that Ace Corporation was paying for Harold and Dorothy’s mortgage, medical bills and groceries.

Can Robert collect his judgement from Harold and Dorothy as individuals? What would that be called?

Expert Solution

ANSWER:

A corporation is a legal entity that is separate and distinct from its owners. It is lso called a " legal person".Corporations enjoy most of the rights and responsibilities that individuals possess: They can enter contracts, lend and borrow money, sue and be sued, hire employees, own assets, and pay taxes.

In the given case,

Mr.Robert, the landlord cannot collect his judgement from Harold and Dorothy, as they are Individuals. Whereas, Ace Corporation is a legal entity seperate and distinct from its owners Harold and Dorothy. But, in exceptional cases, where it is held that, the Individuals are responsible for the liabilities of the legal entity. Courts can legitimately disregard a corporation's separate legal personality, such as where crime or fraud has been committed.

It is called "Lifting the Corporate Veil" or "Piercing the Veil".

CASE LAW: Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22 is a landmark UK company law case. The effect of the House of Lords' unanimous ruling was to uphold firmly the doctrine of corporate personality.

ekkarill92 answered 2 years ago

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