Brian is the 99 shareholder president and director of Arapin

Brian is the 99% shareholder, president, and director of Arapine Corp. He frequently uses the corporation credit card for his personal expenses. If Arapine is insolvent and unable to pay its debts, and the corporation’s creditors sue Brian personally, what is the likely result? (Points : 1) Brian is liable because he is a 99% shareholder. Brian is liable if he, as president, made the contracts with the creditors. Brian is liable because the court will pierce the corporate veil Brian will not be liable.

Solution

Correct option (D). Brian will not be liable.

He used corporate credit card for his personal expenses. When the company is insolvent, the company remains the legal debtor to the credit card company and not Brian as a person. The reasons for which the card was used is immaterial. So, Arapine Corp. will be liable to repay the creditors, not Brian.