Legal Question in Credit and Debt Law in California

Re: judgements and corporations

Generally, the owners/incorporators can be "sued" at any time. All it takes is for a plaintiff to name the individual shareholders on a complaint, file the complaint, and serve it on the named defendants. If the corporation is inactive, it cannot appear in any action and cannot defend itself against the lawsuit. However, if the corporation has no assets, the corporation would be "judgment proof" even if a judgment were entered against it.

Depending upon what theory the plaintiff is bringing its action, one of the circumstances where the shareholders of a corporation may be sued individually, is where the corporation is defunct. Of course, if the corporation did not follow the requisite "formalities" required by law (by keeping complete and accurate minutes, by commingling corporate funds with funds of the shareholders/officers, etc.), a plaintiff may be able to hold the individual shareholders liable even if the corporation is not inactive, or otherwise "judgment proof" on the theory that the corporation is merely the "alter-ego" of the shareholders.

You should probably discuss your particular situation in depth with an attorney in your area to get a better idea of what the shareholders' potential liability is.