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Comment by jbaczuk | Hacker News Reader

"even trigger personal liability of directors and officers for payment" How could this happen?

There is a specific california law which pierces the corporate veil specifically for unpaid wages.

https://hunterpylelaw.com/2021/02/alter-ego-piercing-the-cor...

A bank going belly up and temporarily eating deposits of other corporations doesn't strike me as abusive on the part of the depositing corporations. I doubt the corporate veil would be pierced until the business itself goes bust without paying wages. I'm not any kind of lawyer though.

My attorneys made it 100% clear that missing payroll would make the officers and directors liable immediately in this situation. It was news to a lot of the companies we talked to.

What about the investors, who are also owners, and probably pressured the company to take on debt from SVB?

I assume the officers are liable as shareholders? And by the time this liability was pursued in court the SVB replacement should be working well enough to pay everyone. Unless the regulatory agency can demand immediate payment from the accounts of the officers and directors.

Officers are liable as managers basically. Same as directors. Similar to fiduciary duty.

If there are 20m in unpaid wage claims and they see that there were 20m in bonuses paid out in the last 30/60/90/whatever days, I think a decent prosecutor could make an argument that it abuses the corporate liability shield to pay yourself bonuses when you could have or should have known that the company was not healthy.

Even if you can't make the argument that they could or should have known that the company was unhealthy, I think the argument can be made that the individuals who are missing base salary deserve to have that paid even if it requires clawing back some extraordinary compensation for executives.

People don't like not being paid for work done in the past so long ago they asked politicians to make laws with the aim of deterring wage theft. A good way to create a strong deterrent is to put managers and owners in jail or take their personal money. Absent that bad actors would run up unpaid wage bills then close the corporate entity and escape undeterred.

I think this was a common problem in Hollywood

Not a lawyer but this always struck me as exaggerated.

One, the FDIC was always going to provide a meaningful fraction in days which would have covered payroll. Employees and vendors are going to understand a few days delay because of a bank failure. It's embarrassing and bad but not existential.

Two, I expect the law is written such that a payment failure for liquidity induced bankruptcy isn't going to reach directors/officers. It's California so who knows but a law that did would be very badly written.

Why guess, we have the Internet these days.

https://leginfo.legislature.ca.gov/faces/codes_displaySectio....

Or for some analysis

https://www.fennemorelaw.com/california-court-clarifies-pers...

Kind of why I mentioned it. Most CEOs and Directors don't know they are personally liable if wages aren't paid.

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