Question
Andrew, the shareholder-manager of a wheel manufacturing company (Wheelies Inc.), starts a new auto parts manufacturing company (CarBasics Inc.). He makes sure that Wheelies gets
Andrew, the shareholder-manager of a wheel manufacturing company (Wheelies Inc.), starts a new auto parts manufacturing company (CarBasics Inc.). He makes sure that Wheelies gets all its supplies only from CarBasics at above-market prices. Workers at CarBasics get their salaries from Wheelies. Two years later, CarBasics is a stupendous success while Wheelies has creditors knocking on its doors. Are shareholders of CarBasics liable to creditors of Wheelies?
A) Yes, they are liable because a manufacturer owning a supplier is per se illegal.
B) Yes, they are liable because looting occurred between CarBasics and Wheelies.
C) No, they are not liable because CarBasics is not a subsidiary of Wheelies.
D) No, they are not liable because CarBasics and Wheelies are separate legal entities.
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