Question

What if The Biscuit Bakery was a corporation? Suppose Mrs. Meadows is the CEO, but does not own any stock in the company. The Biscuit Bakery sells shares of common stock to 40 shareholders, all of them individuals living in North Carolina.May the flour vendor recover the money he is owed from Mrs. Meadows' personally?
A. Yes, because she is the CEO, not a shareholder.
B. Yes, because she executed the business transaction that created the liability.
C. No, unless she was negligent or committed a tort or crime in connection with the transaction.
D. No, if The Biscuit Bakery is a close corporation.

Answer 1

Answer:

Correct option is (C)

Explanation:

Mrs Meadows is the CEO, which means she is an employee in the company. So, her obligations are limited to the duties carried out by her. She will be personally obligated for her actions only if she commits a tort or crime related to the transaction.

If that is not the case, then she is not personally liable for the money owed to the vendor. The company is held liable for obligations towards the vendor.