Legal Question in Business Law in California

Re: Corporate Law

Could they? Anybody can sue anybody for anything. Winning is different. You need someone to review all the facts and documents to get an 'informed' and specific opinion and advice on whether what you've already done need attention and correction, and what you should be doing now and in the future, not an anonymous reply from the web. Feel free to contact me if interested in doing so.

Re: Corporate Law

Well, I can give you a little more of a specific answer. The answer is YES.

The principals of a corporation (directors, officers, major shareholders) must pay, or make provision to pay, the creditors of a dissolving (or shutting-down)corporation before one penny can be paid out to the principals. This prohibition includes forbidding the transfer of intangible assets such as customer lists, know-how, premises leases, knowledge of business opportunities, and the like, to a new corporation for less than fair market value.

Any transfer of assets that ignores the creditors to the benefit of the insiders is fraudulent, and can be set aside. There are provisions to this effect in both the Civil Code (Uniform Fraudulent Transfer Act, sections 3439 to 3439.12) and the Corporations Code (Sections 2004, 2009, 500, 501 and 506, for starters).

Liability would affect any insider that benefitted, and any insider that knowingly participated in authorizing the transactions.

There is some case law in California that goes further, and says that the directors of an iliquid corporation become fiduciaries of the creditors, but I think this doctrine is disfavored in California as going a bit too far. It is enough that the transactions ignoring the creditors are fraudulent.

The bottom line is that you might be able to challenge the validity of the son's attempts to collect on the basis that his power of attorney was improperly obtained (that's a long shot, in my estimation), but whether the son has the right to collect it or not, trying to avoid liability to someone by setting up a replacement corporation is fraudulent and a creditor with a good lawyer and a full head of steam will cause all involved a good deal of (perhaps well deserved) pain and suffering.

If the corporation is bankrupt, put it in bankruptcy. Let a judge and trustee figure out how to redeploy the assets.