eMinutes Blog

Corporate Minutes Destroy Alter Ego Claim in Mix v. Tumanjan

January 18, 2012

He conducted annual board meetings and memorialized the meetings in the corporate minutes.  He called special sessions of the board to authorize important corporate decisions, such as the purchase of an office building.  These sessions were also memorialized in the corporate minutes.

If there was ever a case that demonstrates the importance of corporate minutes in an alter ego case, it’s  Mix v. Tumanjan Development Corp., No. B157394, 2003 WL 21810813 (Cal. Ct. App. 2d Dist. Aug. 7, 2003) (unpublished).  This is an unpublished decision (meaning it can’t be relied upon as law), but it shows just how much corporate minutes influence judges who are asked to pierce the corporate veil.

The court’s analysis of the claim is like a three-point shot for team corporate minutes:

The trial court’s determination that Michael was not the alter ego of TDC is supported by substantial analysis. As the sole director, officer, and shareholder of the corporation, Michael complied with corporate formalities. He conducted annual board meetings and memorialized the meetings in the corporate minutes.  He called special sessions of the board to authorize important corporate decisions, such as the purchase of an office building.  These sessions were also memorialized in the corporate minutes. 

In response to the creditor’s arguments, the court noted that “the mere fact that Michael was the sole owner, director, and officer of the corporation, and TDC may have been inadequately capitalized are not sufficient to establish alter ego as a matter of law”.

The lesson here is plain and simple.  Alter ego liability is preventable.  Even for a single person corporation, corporate minutes matter.  To learn more about the impact of keeping corporate minutes on alter ego liability and the cases described in this article, see Avoiding Alter Ego Liability with Proper Corporate Minutes.

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