Parkin Son

The general rule is that an officer cannot be held personally liable with the corporation if he acted within the scope of his authority and in good faith for the corporation. In such cases, the officer’s acts are properly attributed to the corporation. However, if it is proven that the officer has used the corporate fiction to defraud a third party, or that he has acted negligently, maliciously or in bad faith, then the corporate veil will be lifted and he will be personally liable for the particular corporate obligation involved.
Life is not always an infinite reservoir of perks for corporate directors and officers. Every breathing moment as a director or officer entails countless perils capable of snuffing out an otherwise fruitful corporate career. A lawsuit against the corporation often includes directors and officers as defendants. A director may be made responsible for the actions of the board, unless he specifically votes against the course of action taken by the board. Promptly objecting to board action and putting this objection on the record could help stave off liability charges against a director. If you have to serve as a director or officer in a corporation, some experts suggest that to protect yourself and your personal assets, you should negotiate for an indemnification contract so that the corporation may be compelled to compensate or reimburse you in case you are forced to turn over some of your assets as a result of a lawsuit against the corporation. Furthermore, you may request that the corporation provide you with liability insurance before you sit as director or officer.
Basking in the glow of a business title carries manifold risks. The higher you go up the corporate ladder, the louder the thud once you fall. Stockholders seem insulated from personal liability because as a rule, they cannot be sued for acts of the corporation. But if a stockholder is extensively involved in running the affairs of the corporation to a point where he exerts effective control of the corporation, he will be held personally liable and creditors could reach his personal assets. This is true even in homeowner’s associations or charitable organizations. If you have a business title in an association where you have minimum contacts, you may yet have your full share of massive liability exposure. Take the case of a California woman who was raped and robbed in her condominium late one evening. She sued the condominium association and won her lawsuit against the homeowner’s association and the individual board members.

Wise investors usually infuse money into bearer investments. They convert their titled properties, such as real estate holdings, and registered bonds, stocks and other securities into gold, platinum, silver, precious stones, jewelry, numismatic coins, vintage watches, old stamps, paintings and sculptures by masters, baseball and basketball cards and other worthwhile collectibles. These so-called “bearer investments” are easily transportable and convertible into cash if the market conditions are ripe. The asset protection value of these investments lies in privacy and confidentiality. Ownership is difficult to ascertain and trace, as long as these items are bought through a third party or a legal entity, such as a corporation, limited partnership or offshore trust. The disadvantages of bearer goods are a cause for concern. Being small movables, they are easily misplaced or lost and buyers are often hard to find. Their values are gained or lost drastically. You must study the market fluctuations and trends very well; otherwise you may lose a considerable sum of money.

Insuring these items is risky because the ownership of these goods can be traced. However, if a corporation, limited partnership or trust is the insured party, then you may remedy the ownership tracing problem. Goldstein recommends that your best bet is to have gold bullion or coins stored in an offshore deposit box registered in an offshore corporation. Other good investments include warehouse certifIcates for precious metals stored in Swiss or Austrian banks. You could always demand delivery of your precious metals as the certificate holder when the right time comes. You would need professional advice on how to select the proper investments to avoid losing a bundle of cash.

Some businessmen have placed so-called “playfellow mortgagees” against their enterprises as asset insulation against claims and liens. Other strategies employed by asset protection practitioners is to let the corporation owned or controlled by the businessman also mortgage his personal assets. For example, the corporation you control may shield your personal properties if you owe money to your business. Your business entity will the mortgagee to some or all your personal assets including your home, motor vehicles, and valuable properties. A few debtors encumber their assets to close friends and associates, subject to the prevailing fraudulent conveyance rules. If they owe these friends some money, the debtors turn these preferred creditors into mortgagees and they hold a mortgage on the collateral to secure the credit obligations. This could be a risk-laden strategy if other creditors may show the existence of fraud and ask a court to set aside the transaction. This practice is dangerous and is not recommended by asset protection experts. Criminal liability may arise if it is shown that the debtor has a specific intent to commit a fraud or to abscond with his property to the prejudice of his creditors.

Transactional legal work transcends the mere preparation of documents to set up legal organizations and trusts. Transactional attorneys work on corporate and business transactions as well as counseling business clients on their day-to-day operations and long-term corporate strategies, negotiating and drafting agreements and sometimes helping clients save a business deal that is faltering to stave off the threat of a lawsuit. They provide “preventive legal advice” to minimize the risks of litigation. “Life as a deal maker in most law firms,” wrote lawyer Gregory Feis, “involves practice in one or more of three different (but often related) areas of transactional work.” These areas include: 1) mergers and acquisitions (M&A, to anyone in the trade), and similar fundamental corporate transactions, 2) finance work, including representing banks and borrowers in loan transactions, negotiating real estate mortgages and collateral security packages, and addressing bankruptcy issues, and 3) securities law, including public offerings, private placements, and regulatory compliance. Your attorney should be consulted to give his advice or comment on a host of other asset protection issues such as real estate title questions, financial statements, insurance issues, taxes, licenses, permits, and employment and stockholder agreements. He should review crucial documents and contracts before you sign them. These papers include agreements to assign assets and assume liabilities, bills of sale, promissory notes, security agreements, articles of merger, new employment and non-competition agreements and many more.

Many investors shift from peso to foreign currency deposits not so much as a hedge against drastic fluctuations of the peso’s value but because the law exempts foreign currency deposits from attachment, garnishment or any other order or process of any court, legislative body, government agency or any administrative body, Foreign currency deposits are exempt .assets. Peso deposits and investments in government bonds are not. Unlike foreign currency deposits, they can be attached or garnished to satisfy a final judgment and there are more ways to break the secrecy of these bank deposits than foreign currency deposits. As such, peso deposits and investments in government bonds are more vulnerable to predators . This is a patent form of reverse discrimination in banking law. It is unfortunate that the law itself implicitly encourages depositors to abandon the peso in favor of foreign currencies in view of the stronger asset protection enjoyed by foreign currency deposits. Are you still wondering why the value of the peso is plummeting faster than a speeding asteroid? The legal provision exempting foreign currency deposits from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever has baffled even the

Exempt assets are those that are expressly insulated by law from attachment, garnishment, levy, execution and other legal processes. They are the desirable assets that cannot be reached or seized by creditors. Many financially knowledgeable individuals often seek refuge in exempt properties. They convert their non-exempt assets into exempt ones for maximum insulation. Anticipating insolvency and future claims way ahead of time is a component of sound asset protection. Financially strapped persons are advised by asset protection specialists to transform reachable or exposed properties into exempt assets. Money is used to obtain selected properties that are specifically exempt from attachment and execution, such as the family home, tools and trade implements, clothing, professional books and instruments and many more subject to the time and monetary constraints set by law. In a 1944 American case, Congress Candy Company v. Farmer (73 N.D. 174), it was ruled that it is not a fraudulent conveyance for an insolvent debtor to change non-exempt property into exempt property.

Fraudulent conveyances are against the law. In your haste to protect your assets, you may inadvertently breach penal statutes. You may precipitously engage in what managerial gurus call the “ready, fire, aim” approach in asset protection. Always seek the advice of a legal professional before you make your moves. Make sure that you comply with applicable Philippine laws prohibiting fraudulent transfers of property and the setting up of dummy companies, particularly involving community property. Note that without the proper grounds and without Court approval, any agreement between the spouses separating their properties during marriage is invalid. It is essential for the couple to think ahead and complete a prenuptial agreement that separates their property or to provide legal devices that will protect their assets from attacks. This agreement must then be registered at the appropriate civil registry and the property registry to affect third persons. Or if the couple failed to make a prenuptial agreement, the spouses may have to go to court during the marriage to dissolve the community property or to obtain a judicial separation of property before any redeployment or restructuring could be made effective. The grounds for these remedies are narrow and limited. The proper legal basis must be shown before these remedies may succeed. Robert Mintz and James Rubens in Lawsuit Proof (1995) revealed some aggressive strategies that are employed by many asset protection planners in foreign jurisdictions, to wit:

A variety of strategies could provide some degree of psychological or legal security to those who own properties. No razzle-dazzle approach is needed. A simplified but integrated plan will achieve the same goal of protecting your assets. The choice of the right legal entity or structure is crucial. No plaintiff with a working brain will initiate a lawsuit if the prospects of recovery are inadequate or nil. Keeping your properties out of your name and technical control by creating limited partnerships, trusts and corporations is just one asset protection technique. Other strategies and game plans include dealing in cash, valuable chattels and bearer investments (such as jewelry, stamps, antiques, collectibles, gold bullion and other precious metals), spreading your properties, opening offshore bank accounts and trusts (such as the Cayman Islands, the Bahamas, the Cook Islands, etc.), maximizing properties that are exempted from execution or collection (such a homestead or family home), getting a team that will keep your confidences and secrets, encumbering your assets to make them less attractive to predators, and buying insurance and annuities. Experts suggest that you must keep your creditors out of touch with each other so as not to help them gang up on you. The absence of a paper trail will make properties difficult to track down. The proper titling of your real estate properties will make tracing cumbersome and expensive for property hounds. Extreme measures such as declaring bankruptcy or insolvency and giving away your assets to others are more ways to give you a fresh start and to help you retain some of your assets.
Confidentiality is the central theme in asset protection law. Leaks about the ownership of your properties will provide tracks for predators to follow. Other experts state that the surest asset protection is to move your assets out of reach of the local courts and execute a durable power of attorney to make sure that someone you trust completely has access to these assets if you become incapacitated.