X owns 99% of the capital stock of AAA Corporation. X also owns 99% of BBB Corporation. AAA Corporation obtained a loan from CCC Bank. On due date, AAA Corporation defaulted. BBB Corporation is financially healthy. Which statement is accurate? a. AAA Corporation and BBB Corporation, although both are owned by X, are two distinct corporations with separate juridical personalities. Hence, BBB Corporation cannot automatically be held liable for the loan of AAA Corporation
X owns 99% of the capital stock of AAA Corporation. X also owns 99% of BBB Corporation. AAA Corporation obtained a loan from CCC Bank. On due date, AAA Corporation defaulted. BBB Corporation is financially healthy. Which statement is accurate? a. AAA Corporation and BBB Corporation, although both are owned by X, are two distinct corporations with separate juridical personalities. Hence, BBB Corporation cannot automatically be held liable for the loan of AAA Corporation
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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X owns 99% of the capital stock of AAA Corporation. X also owns 99% of BBB Corporation. AAA Corporation obtained a loan from CCC Bank. On due date, AAA Corporation defaulted. BBB Corporation is financially healthy. Which statement is accurate?
a. AAA Corporation and BBB Corporation, although both are owned by X, are two distinct corporations with separate juridical personalities. Hence, BBB Corporation cannot automatically be held liable for the loan of AAA Corporation
b. X, being a controlling owner of BBB Corporation can automatically be held personally liable for the loan of AAA Corporation
c. BBB Corporation, owned 99% by X, can automatically he held liable
d. The principle of piercing the veil of corporation fiction can be applied in this case
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