Incorporation and personal bankruptcy
If I own 100% of the shares of an incorporated business , what happens to the corporation if I file personal bankruptcy? Will the corporation also become bankrupt if the trustee can’t find a buyer for the shares?
Will all transactions of the corporation in the three months preceding my bankruptcy come under scrutiny? (large bonuses to relatives for example)
Will the creditors of the corporation (my relatives) be given preference over my creditors to the corporation’s assets?
Will unpaid salaries , bonuses , vacation pay for the employees (my relatives) be protected?
Firstly you will need to contact a local trustee as many of your questions will depend on specific information that is not available to me in this type of a forum.
However, let em give you an overview, when you file for bankruptcy the shares of your incorporated company automatically vest in the trustee. This means the trustee will now have control of the company and the only way to retain control of this company is to repurchase the shares from the trustee. However, to do this the trustee will have examine the business to determine a value of the shares. This examination will likely turn up anything that is out of the ordinary (i.e. large bonuses to family) and that could cause you problems. At the end of the day the trustee will have to determine if the transactions were bone fide (in good faith) or done in an attemp to thwart the rights of creditors and all this will be taken into consideration when the trustee is deciding what needs to be done. Technically speaking if there are enough questionable transactions the trustee could put the company into bankruptcy, attack many of the questionable transactions, obtain court judgement from the parties in question and seek repayment from yourself or the other parties to the transaction. So as you can see the best thing to do is to contact a local trustee before you do any of these things so you can understand what the best way to proceed will be.