I am a director of a corporation; it is a small farm with land assets. There are 5 directors and we jointly manage the farm. I have just discovered that one of the directors has applied for a business credit card in the farm's company name, and is using it for personal use, and has run up $4k in personal debt on it. I have downloaded the terms and conditions, and she and the corporation are listed as Jointly & Severally liable. Does this mean that if she defaults the Credit Card company can come after the corporations assets? (Joint), and if she does default and have a judgement against her by the CC company, could she come after us for Several liability? Is her action technically fraudulent?
Yep. I'm no attorney, but my understanding of jointly and severally, is that the cc company could come after both the corp and the director at the same time (jointly), or figure out who has money to pay them, and come after either individual (severally). I believe the severally clause kills the argument as to what percentage of the debt belongs to whom, and the cc company could seek 100% from either. I don't know if the director can come after the corp to pay it. If they are using it for personal use, and you demanded the statements showing it, I would think she would have a hard time proving the corp needed to pay for something that they received no benefit of. But these are just my opinions. I would think you would have to review your corporation papers and see what powers she was given. I would also be curious to see what the terms are with the cc company. If she's using a business card for personal use, she may have acted fraudulently upon the cc company. Regardless, she has put the corp at risk at it needs to be addressed....just my 02 cents.
It would also depend on the agency law of your jurisdiction. I don't think this act would place the corporation in harms way under the MRBC but, your state may not subscribe to it. In any event, if you ratify this action, the corp is on the hook.
