Corporate Law 2

1. The three friends disregard corporate formalities by acting as if they were the managers of the company when they are just shareholders. By splitting the company's profits, they are also constantly pulling money out of the business, which may be commingling the debtor and defendant’s assets and may leave the corporation undercapitalized. If the court examined these factors and determined that there was a unity of interest, there would be grounds for the court to pierce the corporate veil.

2. Because only one of the companies is the registered owner of all the construction vehicles, there is a possible enterprise liability claim if formalities are not observed in accounting for the use of the vehicles. However, if this was the only thing they did, then the court may find that it is not sufficient. If the companies also had undocumented transfers between corporations, or there was an unclear allocation of profits and losses between the corporations, there would be a good case for finding enterprise liability. The practical test is “were the companies really operated like one big company as opposed to separate businesses”? Although the companies don’t adhere to all corporate formalities, it is not specified as to what formalities are not observed, so it can’t be determined if there is a basis for going after Nadav directly.

3. In Israel, there are no formal capitalization requirements to incorporate a company. Therefore, under Israel Companies law, Jacob did not technically break any rules by investing the amount that he determined was sufficient. However, if it can be determined that the company was so clearly underfunded that it amounted to “extreme undercapitalization”, the courts could rule that Jacob Candy, Inc. was a fraud on creditors.

4. In Israel, creditors get paid out of the company’s assets before SH. Investing only 10,000 NIS as starting capital and loaning an additional 1,000,000 NIS, suggests that the company is undercapitalized...