He should escape liability for the Multimedia debt.?

Question

J. R. Mullins, the sole director and shareholder of the Food Stores of South Carolina, Inc. (FSSC), opened two Sav-A-Lot grocery stores in Myrtle Beach. He then established another corporation, Food Stores of Greenville (FSG), and opened a Sav-A-Lot store in the Greenville community. Mullins was also FSG’s sole shareholder and director. He instructed FSG’s vice president to place Sav-A-Lot advertisements with the Greenville News-Piedmont, which was owned by Multimedia Publishing of South Carolina, Inc. The two Myrtle Beach stores were later closed and their inventory trans¬ferred to the Greenville store. FSG then transferred $144,000 to Mullins and other of his corporations—purportedly to repay debts owed by FSG. When the Greenville Sav-A-Lot closed following this transfer, Multimedia was left unpaid for the advertising services that it had provided to FSG. Mullins claimed that he had relinquished man¬agement of FSG to others and did not know that Multimedia had not been paid.

Can Mullins, as cor¬porate director and sole shareholder of FSG, avoid liability for the debts of the FSG corpo¬ration when he was on notice that the advertising had been ordered from Multimedia? Is Mullins’s statement that he did not know of the debt tantamount to neg¬ligence and a breach of his duties as a director? Should Mullins have inquired into whether the Multimedia account had been paid? And whether Mullins should escape liability for the Multimedia debt.

Answer 1

What is your interest in this? Talk to your attorney. What is the amount of the unpaid advertising? I suspect that it would be very expensive to gather the evidence and bring suit against the advertisers, The burden of proof would be on the complaining party to show there was some improper slight of hand going on. Keep in mind that although you were not fairly paid, you might lose your law suit for lack of evidence.