Business Studies Paper on Capitalized Veil

Capitalized Veil

The roles of corporate officers, directors, and shareholders

Corporate officers, directors, and shareholders are some of the most important group of professionals in any organizational arrangement. The individuals are responsible for executing different tasks in the corporation. For instance, shareholders comprise of individuals with investment stakes in organizations. Such individuals can participate in the election of board of directors and designing important bylaws. Additionally, shareholders can influence the implementation of certain organizational decisions among other limited corporate issues. Shareholders may further attend corporate meetings and participate in development of certain policy decisions. Lastly, the shareholders can launch investigations on financial statements and books or accounts to ascertain the efficacy or viability of their investment decisions.

Alternatively, directors are responsible for the direct management of organizational affairs. The directors, elected by shareholders must act with due diligence to facilitate the successful management of corporation. The individuals explore different issues influencing the development of corporate strategies and make innate decisions on organizational operations. In essence, directors have the fiduciary responsibility to act reasonably and ensure full protection of the company’s best interests (Tsang, 2014). Any decision made by the directors on behalf of the company should strengthen corporation’s profitability and overall performances. Lastly, the directors should base their decisions on reasonable information and rational perceptions of issues. However, the directors are not held personally liable in case they fail to implement some of the organizational decisions and plans.

In addition, corporate officers are responsible for executing most of the organizational plans and statutes. Corporate officers include the presidents, vice-presidents, secretaries, and treasurers among other important corporate players (Kushner, 2003). For instance, corporate officers such as presidents (CEOs) facilitate the overall implementation of marketing plans and general objectives. Corporate treasurers and secretaries keep clear record and tracking or finances and minutes respectively. Likewise, the officers act as special agents or the organizations in the negotiation of contracts and development of expansive market niches (Kushner, 2003). Notably, all contracts signed by the corporate officers on behalf of the corporation are legally binding based on the stipulated terms. The corporate officers’ fiduciary duties towards corporations imply personal liabilities in case of possible failures (Tsang, 2014). However, certain company laws protect corporate officers from personal liabilities. According to such laws, corporations are legal entities with distinct identities separate from corporate officers or any other important individuals.

The four ways to capitalize a corporation (capitalization)

Capitalization describes processes involved in the financing of different business operations. Corporations or entrepreneurs can apply numerous options to capitalize their activities. For instance, corporations can use private equities to implement their objectives, goals, and marketing plans. In essence, negotiating private equity funding will increase the viability of the business and improve its general profitability (Doganova & Muniesa, 2015). Equity funding may include private investment in the company’s stocks or shares and partnership with other entities or individual entrepreneurs. Moreover, most equity investors may facilitate the development of the corporation’s business credit and repayment of credit interests.

In certain cases, corporations may apply liquidation strategies to raise capital to enhance their market performances and viabilities. Releasing the company’s inventories may shrink its net worth in the short run, but is a viable decision. Through liquidation, corporations can stay afloat especially when in desperate need for capital (Doganova & Muniesa, 2015). Lastly, bank loans are other important source of capitalization that corporations can apply. Nevertheless, bank loans require well-constructed plans and management expertise to enable prompt repayments.

The two questions in the Miner v. Fashion Enterprises, Inc

Question 1

The appeals court was right in its decision finding the shareholders and directors liable for the debt owed by the insolvent company (Melvin & Katz, 2011). The directors had the legal duties and obligations to govern the company effectively and avoid scenarios resulting in insolvency. Common laws dictate that the directors act as guarantors and should ensure that possible losses do not cause insolvency. Additionally, in case of insolvent liquidation, the shareholders will not receive any dividends and bears the losses on behalf of the company.

Question 2

The application of the doctrine of the piercing the veil defeats the purpose of limited liabilities. The doctrine is a legal requirement enabling the treatment of the rights of corporations similar to those of its stakeholders. In particular, common laws require that parties seeking to eliminate “limited liabilities” should demonstrate specified elements of fraud or fraudulent activities (Tsang, 2014). In the case, the company has corporate personalities distinct from its shareholders preventing possible misuse of the corporate forms.




Doganova, L., & Muniesa, F. (2015). Capitalization Devices. Making things valuable, 109-25.

Kushner, A. (2003). Applying the responsible corporate officer doctrine outside the public welfare context. J. Crim. L. & Criminology, 93, 681.

Melvin, S. P., & Katz, M. A. (2011). The legal environment of business: A managerial approach: Theory to practice. New York: McGraw-Hill/Irwin.

Tsang, K. F. (2014). Applicable Law in Piercing the Corporate Veil in the United States: A Choice With No Choice. Journal of Private International Law, 10(2), 227-264.