PRC-3 · Chapter 2 · Question 56 of 61
While limited companies protect shareholders from business debts, this protection is not absolute. Under corporate law, if a company director commits deliberate financial fraud, what happens to their liability?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The 'corporate veil' is lifted, and the director becomes personally liable for the fraudulent acts
Explanation
Directors who engage in fraud or illegal activities lose the protection of limited liability and can be held personally and criminally liable (lifting the corporate veil).
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