Modern corporation law protects company owners, shareholders and investors from personal liability for the debts of the corporation. This protection has permitted the flourishing of businesses and massive public corporations. But it has also created additional risks to lenders and suppliers.
Banks usually obtain personal guarantees from the owners and have their loans secured on assets of the business. This increases risk to non-bank lenders and trade creditors.
It is in the interest of trade creditors and secondary lenders to go through the corporation and attempt to recover against the directors and shareholders directly. If the corporation was incorrectly setup or improperly managed, it may be open to attack.
Failure to properly issue shares or capitalize the corporation can lead to a claim against shareholders. The use of the corporation for fraudulent or criminal activity is also the basis for a claim. If the corporation acted in a way to unfairly disadvantage minority shareholders or creditors, the directors may be liable.
Breach of certain laws, such as environmental legislation can also be the basis for personal liability.
Corporate and security laws are complex and ever changing and should not be a DIY project. Call for assistance.