Country Contractors, Inc., contracted to provide excavation services for A Wests
ID: 377722 • Letter: C
Question
Country Contractors, Inc., contracted to provide excavation services for A Westside Storage of Indianapolis, Inc., but did not complete the job and later filed for bankruptcy. Stephen Songer and Jahn Songer were Country's sole shareholders. THe Songers had not misused the corporate form to engage in fraud. The firm had not been undercapitalized, personal and corporate funds had not been commingled, and Country had kept accounting records and minutes of its annual board meetings. Are the Songers personally liable for Country's failure to complete its contracts? Why or Why not?
Explanation / Answer
As per the above case, Songers are not personally liable for country's failure to complete its contract because the Corporate Law provision provides that shareholders hold limited liability and cannot be held personally responsible or liable for corporate's acts. Also, the provision mentions that the shareholders would be personally liable only if the plaintiff party proves in the court with evidence that the shareholders have neglected the corporate form leading to fraudulent act or misrepresentation of facts, not presented the accounting and corporate records before the board meeting, undercapitalized the assets of the company etc.
Since the Songers fulfilled all the required corporate formalities and presented the essential records without any fraudulent act they should not be held personally liable in this case.