What is an officer’s liability regarding a bankrupt corporation?
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What is an officer’s liability regarding a bankrupt corporation?
I am vice-president of a business (C corp) that is nearly bankrupt. There are 2 shares of stock valued at $50 each. I have 1 share and my brother-in-law the other. He is president; I am vice-president. We’re behind on all bills, except for an SBA loan. What would happen to me if I removed myself as officer (vice-president)?
Asked on May 31, 2011 under Business Law, West Virginia
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
Generally speaking, a corporate employee or officer is NOT responsible for the debts or obligations of the corporation. There are a few exceptions:
1) Anything which you personally guaranteed;
2) A "corporate" credit card issue in your name--the credit card issuer can go after anyone named on the account
3) Certain tax obligations, IF you were the (or one of the) responsible officers for that kind of tax; e.g. payroll tax obligations
4) Certain employee compensation (e.g. wage) debts or violations, where officers can be sued personally
5) Tort debts (e.g. accidents) arising out of negligence personally done by that officer (e.g. you were the driver of a company vehicle which hit someone)
To double check your potential personal liability, take all the debts and their documentation with you to consult with an attorney (e.g. bankruptcy attorney) who can evaluate your specific obligations. Remember: the general rule is that you are not liable as a corporate officer (or shareholder) and the exceptions are just that--exceptions.
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