A corporation with a reasonable debt-to-equity ratio will not have its corporate veil pierced on the grounds of thin capitalization.

Question

A corporation with a reasonable debt-to-equity ratio will not have its corporate veil pierced on the grounds of thin capitalization.

Quizplus · Accepted Answer

Inadequate capitalization,called thin capitalization,is proved when capitalization is very small in relation to the nature of the business of the corporation and the risks the business necessarily entails.Thin capitalization defrauds creditors of a corporation.

A Corporation with a Reasonable Debt-To-Equity Ratio Will Not Have