Legal Question in Business Law in

President of Company and Company are not One

I'm not licensed in Guam, but I don't know whether any Guam attorneys are on this list. At any rate, the law in this area is pretty uniform from one jurisdiction to another.

If the company is set up properly, then the answer is no. The president is an individual with his own property and his own debts, and the company's assets are completely separate. Many companies, however, aren't run properly and may thus expose themselves to liability. This is especially true of businesses owned by one or a few individuals, family-owned businesses and businesses dominated by a single individual. It is also often true of small companies that don't see the need to observe all the legal formalities and/or don't have competent legal counsel watching over their affairs.

You say that Mr. O owns a "company", but you don't say whether it is a corporation, a partnership or some other type of entity. This distinction can matter, but probably won't.

If Mr. O's debt to Company B is personal, then Company B has no recourse against Company A at all. One exception is if Mr. O fails to observe the corporate formalities and thus exposes himself to liability by what is called "piercing the corporate veil." However, if he has kept his personal finances separate from the company's, then the company is not liable for his debts.

If the company is not liable, then certainly the clients cannot be forced to pay. They are even further removed from Mr. O's personal affairs than the company is. Even if the company is liable, there is no way to sue the clients directly; the best Company B can do in this regard is to get a judgment and, perhaps, garnish Company A's receivables.

If the company is somehow found liable (as, for example, if it is really the company's debt and not Mr. O's personally), and if the company doesn't have the means to pay the debt, a court might garnish the company's receivables to satisfy the obligation. This would only be feasible after a trial, however, and Company B would ordinarily have no way to go after the clients directly.

Edward Hoffman

Law Offices of Edward A. Hoffman

11620 Wilshire Boulevard, #340

Re: President of the Company-collecting

I can't say about Guam in particular, but I'm pretty sure this would apply -- ask a Guam lawyer to be sure.

Anyway, O and A are different entities. B cannot collect from any third party until it has a judgment against O. At that time, it can garnish money owed to O, including wages, dividends, and othe money owed by A to O. B cannot try to collect from A's clients, as they don't owe O anything.

Daniel Press

Chung & Press, P.C.

6723 Whittier Ave., Suite 302