Limited liability

The failure of a statutory close corporation to observe the usual corporate formalities or requirements relating to the exercise of its corporate powers or management of its business and affairs is not a ground for imposing personal liability on the shareholders for liabilities of the corporation. (Code 1981, § 14-2-926, enacted by Ga. L. 1988, p. 1070, § 1.) COMMENT Source: Model Statutory Close Corporation Supplement, § 25. There was nothing comparable in former Georgia law. The only possible reference to informalities was in former § 14-2-120(b), to the effect that nothing in any agreement ‘‘shall be invalid as between the parties thereto on the ground that it is an attempt by the parties thereto to restrict the discretion of the board of directors . . . or to treat the corporation as if it were a partnership or to arrange their relationships in a manner that would be appropriate only between partners.’’ This only operates to make these agreements enforceable among the parties, and does not speak to third parties. The purpose of this section is to eliminate the possible argument that the shareholders in a statutory close corporation are individually liable for the debts and torts of the business because the corporation did not follow the classical model of a corporation. Pursuant to Sections 14-2-920, 921, and 933, a statutory close corporation may in effect function like a partnership, although legally the business is still a corporation. This section does not prevent a court from ‘‘piercing the corporate veil’’ of a statutory close corporation if the circumstances should justify imposing personal liability on the shareholders were the corporation not a statutory close corporation. It merely prevents a court from ‘‘piercing the corporate veil’’ because it is a statutory close corporation. 340 14-2-930 The section was derived from the California close corporation provisions. Cross-References Dissolution at option of shareholder, see § 14-2-933. Elimination of board of directors, see § 14-2-922. Liability for preincorporation transactions, see § 14-2-204.