Discussion Question One Due Day 2 Wed Tom inherited his father s landscaping business and incorporated the business after he read an article in Lawn News advising landscaping businesses to incorporate Tom has been sued by a customer whose prize rose bushes were accidentally damaged by a landscaper employed by Tom s corporation This incident occurred subsequent to the formation of the corporation Tom called his attorney Hector to represent him in the lawsuit When Hector asked for the corporate minutes Tom said What corporate minutes Hector advised Tom that his personal assets could be taken if he lost the suit but Tom said No don t worry I m a corporation I have no personal liability Is Tom correct Identify and discuss the legal principle that would be applied by a court to resolve this issue and predict the outcome of the suit against Tom First of all it seems that Tom should of known what corporate minutes where and why they were important For reference here corporate minutes are simply a recap of the actions that a corporation s board of directors or shareholders have taken Typical information that may be included in the corporate minutes are information about major purchases by the corporation hirings firings acquisitions etc Back to the corporation aspect of things Tom here is the shareholder in the corporation which I believe means he owns it Below Tom are the directors who are responsible for making policy decision and employing officers or workers Those officers workers are responsible for the day to day operations The corporation can be held liable for the acts of the directors and officers The directors and officers can also be held liable for breaches of the duty they have for loyalty and care As the shareholder here Tom himself has limited liability which means he personally can only be held liable for debts and obligations of the corporation The officer or worker for Tom s corporation had the duty of car which requires him to act in good faith with care and in a manner that is in the best interest of the corporation The worker themself who breach that duty and ruined the roses is personally liable to the corporation for any damages caused So if I got all that right and the customer whose rose s where damaged by the landscaper officer worker sued the corporation then yes Tom as the shareholder is responsible for paying the claim if he would loose his case In turn Tom would be able to sue that landscaper since he breached his duty to the corporation by acting carelessly Second response Tom inherited his father s landscaping business and after reading an article in a newspaper he decided that he should incorporate the business However after the incorporation was complete Tom was sued by a customer who s prize rose bushes were accidentally damaged by a landscaper that is employed by Tom s company When Tom took this case up with his attorney which asked for the minutes for the corporation Tom 1 was unable to provide them because he didn t know what they were The attorney advised Tom at this time that if he lost the suit that his personal assets could be taken but Tom said there was not worries because he was a corporation This incident occured after Tom had incorporated this business and therefore would fall under the provisions set forth for corporations Under those provisions shareholders can not be held personally liable for the debts and obligations of the corporations In this case I believe that the failure to keep and maintain the appropriate corporate records would be considered thin capitalization This is called piercing the corporate veil because the corporation has been formed without sufficient capital as well as the corporate records have not been maintained My prediction for the outcome in this case would be that the courts will ask to review the articles of incorporation as well as be corporate minutes Based on the scenario Tom would be unable to produce this corporate minutes thus proving that the corporation was formed with thin capitalization Once this was proven a court could disregard the corporate protection given to its shareholders thus putting Tom s personal assets at risk and making him personally liable 2