Is That Legal? A Law Blog

Are You Responsible For A Corporation's Debt?

If you invested in a corporation's products and services in the past, you may wonder if you're responsible for the corporation's debt once it files bankruptcy. In most cases, investors aren't liable for a corporation's debt. However, you may want to speak to a corporate lawyer about your situation soon. Learn more about limited liability and how a corporate lawyer may help you below.

Can You Be Held Liable for a Corporation's Debt?

Many corporations use or rely on investors to fund their companies. Investors often hold shares, or certain rights, in a corporation. Once a corporation becomes bankrupt or files for bankruptcy, investors may or may not lose any shares they have in the company. However, some creditors may attempt to hold some shareholders financially responsible for a corporation's debt. 

Under most circumstances, investors aren't legally responsible for a corporation's debt. The law can hold an investor liable for a corporation's debt if the individual:

  • committed some type of fraud to obtain shares in a corporation 
  • co-signed documents for a corporation to receive funding from another entity
  • signed a legal agreement that makes them responsible for a corporation's debt

If you didn't do any of the things above but still receive legal threats from creditors regarding a corporation's debt, consult a corporate lawyer now.

What Can a Corporate Lawyer Do for You?

A corporate lawyer may take many steps to protect you from a corporation's creditors, including obtaining evidence that clears you of responsibility for the debt. A lawyer may need to examine the shares you hold with a corporation during the investigation. If you only have shares in the company and nothing else, you may not be held responsible for a corporation's debt.

A lawyer may also request written statements from a corporation regarding your role within it. A corporation may provide documentation on when you invested in a company. If you obtained shares from a corporation before it becomes indebted to creditors, you may not be liable for the debt. You may still be able to keep or obtain some of your shares in a corporation after they complete their bankruptcy. 

A corporate lawyer may do a number of other things to protect you during a corporation's bankruptcy filing. You can obtain the solutions you need by consulting a lawyer or their law firm directly.

For more details about corporate debt and whether or not you may be liable for it, call a corporate lawyer today.