Serving on a board can expose you to a number of potential lawsuits, including alleged acts of negligence, misjudgment or financial mismanagement. Being found guilty of any act of misconduct puts you at risk of losing your personal assets. A common fear of personal liability keeps many people from serving on a board of directors. People generally establish corporations so they can undertake activities without the threat of a personal liability lawsuit. In most cases, directors and officers are immune from liability for corporate acts, and as a general rule, courts will allow corporate creditors to seize only corporate owned property. However, the courts will not allow creditors to “pierce the veil” and seize personal assets when a corporation has not followed the formalities required of a corporation. This most often occurs when the corporation takes actions without the board of directors having granted formal authority, or corporate assets have not been segregated from the assets of directors.
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Did you know many common, frivolous legal claims may qualify as exclusions in your existing policy – for example, claims of sexual harassment or molestation are usually excluded from traditional business insurance policies?
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