evidence showed that clearly they had no authority and though annual reports were filed with the secretary of state, the record confirmed that corporate formalities were regularly overlooked.
Fourth, no dividends were ever paid.
Fifth, the corporation--V & M Industries, Inc.--was insolvent at the time of the trial of this matter. The corporation was never adequately funded and by March of 1996 the corporation was totally dissolved.
Sixth, the record set forth references to the fact that other corporate officers and directors were nonfunctioning. The facts showed that the target shareholder, though he sold his shares to a third party for $1, continued to direct the business affairs of the corporation.
Seventh, as previously mentioned there was an absence of corporate records. Though the claim was made that one set of minutes was discovered, it was established that there was an absence of corporate records, including corporate minutes for the corporation.
Eighth, it was concluded after a complete review of the records that the corporation was a mere facade for the operation of the target shareholder. This was determined basically on facts relating to the handling of funds in the target shareholder's personal account and the corporation.
The court found in its ruling that all eight factors as set forth herein were present and the court reversed and remanded the case for further proceedings. In representing corporations as counsel, all attorneys should be aware of these requirements that sufficient written action is taken to avoid the possibility of an action to pierce the corporate veil.
Much has been written about "the Year 2000 computer problem" which requires converting 2-digit dates into 4-digit ones that recognize the difference between the 1900's and the 2000's. Unless you've been out of the universe, you've heard about this. But did you know that the problem must be addressed on two fronts: hardware and software? First, you must check your computer itself (the hardware), because if it's not ready for Y2K, it will send the wrong information to the software programs loaded onto the computer, and the software won't work either. Second, you must check each and every software program on your computer, beginning with the operating system. And did you realize that the Y2K problem isn't limited to personal and mainframe computers? It also potentially affects every device, which uses an embedded computer chip to perform any part of its functions. A typical business, for instance, might depend on any number of such devices: elevators, security systems, fire alarms, fire suppression systems, parking lot gates, vaults, heating and air conditioning systems, thermostats, lighting systems, phone systems including PBX, voicemail, switching and fax services. Those are the general devices. Then there are also the programmable trade fixtures and those with embedded chips such as printers, presses, stampers, metallizers, conveyors, painters, and other devices too numerous to mention. The loss of any one of these systems could close the doors. And consider the other devices upon which we rely: electronic timeclocks, coffee makers, landscape watering devices, vending machines, postage meters, copy machines. Any of these might fail to work properly because they are not Y2K compliant. Even if all of your computers, software and devices were fully Y2K compliant, your company could still fail to meet its obligations if a necessary supplier or other third party on whom your company relies, fails to meet its deadline for compliance. Think of all those you rely on - suppliers, your bank, payroll services, 401(k) plan administrator, etc. They must also be compliant, or it will affect you. Are they ready? You need to know. If you haven't started to address Y2K yet, you probably won't get it all done. You need to prioritize. This is triage, so start with the critical systems - those that you need to keep the doors open - and expand from there. You should do everything you can to prepare in the time remaining, but also plan that something will go wrong, and prepare for that, as well. You're going to need professional help with both legal and technology issues, although there may be some things you can do on your own. Code programmers and Y2K consultants are in short supply, and their prices will be rising. Hire sooner, if you're going to, rather than later. But don't sign any contract until your lawyer reviews it, and stay in close communication with your lawyer regarding all Y2K issues. There's more to this than meets the eye. As for your computer systems, here's what to look for: Hardware Will Your Computers Recognize the Year 2000? A computer knows what date it is first of all because of its hardware. Every personal computer has two devices that govern the date: the Real Time Clock (RTC/CMOS), and the Basic Input/Output System (BIOS). Most people who know about the BIOS assume that if the BIOS is Y2K compliant, then the computer will be. Not true. The CMOS must also be Y2K compliant. If you want the Techie details in plain English, read the next paragraph. Otherwise, skip to "Leap Years". Just remember that both the CMOS and the BIOS must be Y2K compliant. Techie Details (in Plain English): Ordinarily, when you turn on a computer, the BIOS talks to the CMOS, which talks to the operating system, which talks to the software applications. The BIOS tells the CMOS the correct date, and the CMOS passes it along. But if the CMOS is not Y2K compliant, when the year 2000 comes, it won't understand the date it gets from the BIOS, so it will pass along its own date, which will be wrong. Both the CMOS and the BIOS must be Y2K compliant. Leap Years Even if your computer is ready to handle the transition from December 31, 1999, to January 1, 2000, it still may not recognize that 2000 is a leap year. 1900 was not a leap year, but 2000 is. If your hardware is not Y2K compliant, it will think the year is 1900 - not a leap year. Be sure your computer includes the date Tuesday, February 29, 2000, and that the next day is Wednesday, March 1, 2000. New Computers Even if your computer is brand new, it may not be fully Y2K compliant. Don't rely on the fact that it is new. Check anyway. If you find a problem, the computer will probably still be under warranty, and any fix should be covered at no cost. Software Operating Systems Every computer requires an operating system to make all of the other software work. Some of the most common operating systems are Windows 98, Windows 95, Windows 3.1, MS-DOS, and Mac OS8. Your Operating System must be fully Y2K compliant. If it's not, it will pass along the wrong date to your software applications. Windows 98 is apparently Y2K compliant. Windows 95 is mostly, but not entirely, compliant. Neither are Windows 3.1, MS-DOS, and Novell Netware 3.11 and earlier versions. Mac OS8 is fully Y2Kcompliant, and will operate until the year 29,640, or close to it. DOS and Windows 3.1 systems are not Y2K compliant and will need to be upgraded. If your operating system is not compliant, contact the operating system manufacturer. The easiest way may be to log onto the manufacturer's website, such as www.microsoft.com, or to call the manufacturer for information. Software Applications - Programs Software applications are the computer programs we use to perform various functions. Such programs might perform timekeeping, billing, calendaring, accounting and checkbook functions, word processing, spreadsheet and database functions, scanning, faxing and graphics functions, online research, e-mail, website hosting, internet browsing, internet conferencing, automatic deposit and payment banking transactions, and much more. Each software program you use must be fully Y2K compliant. 1993 - A Benchmark Year If your time to address software issues is limited, try prioritizing which programs you should check first. Use the year 1993 as a kind of signpost. Was the software developed after 1993? Check the software manufacturer's website on the Internet for information about its compliance status. Many software developers will provide a patch or "fix" at no cost. Was the software written in 1993 or before? It's probably not compliant, and you will probably be required to upgrade or replace these programs. Check them first, and contact the software manufacturer if they are not compliant. Some commonly used programs that are known not to be Y2K compliant are Microsoft Word 6.0, DOS Word Perfect 5.1, 6.1 and 6.2, WordPerfect 6.1 for Windows 3.1. If you have one of these, you know it will need to be made compliant. Leap Year Just as you must check your hardware to make certain it reads the year 2000 as a leap year, so you must check your software programs. Again, make sure the program reads the date Tuesday, February 29, 2000, and that the next day is Wednesday, March 1, 2000. Other Date Limitations In addition, many software programs have been written with internal date limitations. The chances are, however, that you will have upgraded your software by that time. But then that's what yesterday's programmers thought about the programs we're still using today. Date-Dependent Functionality or Tech Support Eligibility Some software programs have embedded in them the dates through which the product will function, or the date until which you are eligible for technical support either for free or pursuant to a paid program. If the program can't make the transition to January 1, 2000, you may well lose the ability to run the program or to qualify for tech support, for at least some portion of time. Suppose your program stops working on January 1, 2000, which is a Saturday, and on Monday morning, you call tech support for help. Now imagine how many others will be on the phones (providing they work) calling tech support for help with THEIR programs. This is something that you must fix now. What if the Manufacturer Says the Software is Compliant? As you check your software manufacturer's website for compliance details, pay special attention their definitions of "compliant" or "ready". Virtually every manufacturer conditions its compliance on the compliance of all of the hardware and every other software program on the computer. In a case where you suffer a failure, each manufacturer is likely to be pointing the finger at the other. Custom Programs Many industries depend heavily upon custom-created software specific to their needs. After years of modifying the software to suit your particular needs, you may find that it will not work after January 1, 2000. Contact the custom manufacturer immediately to determine if the program is compliant, and if it is not, whether it can be made compliant. Depending upon when you commissioned the program, and the terms of your contract, you may be able to get this work done at no cost. Contact your lawyer as soon as possible. Data Often the data files your company has saved have been stored in a date format that is not Y2K compliant. If you try to retrieve them after January 1, 2000, without fixing them, they may be lost, corrupted, or simply inoperable. These stored files are usually the most costly to fix because each one has to be fixed manually, and that requires many hours of labor. However, at least one new Y2K product on the market purports to be able to fix all of the data files from certain applications. See "Resources" below. Devices with Embedded Computer Chips There's no easy answer to this problem. Unless the device is programmable, the chip is embedded and probably cannot be easily removed for testing. Often, removing the chip means breaking the device, which is not productive. If you can live with the failure of the device on January 1, 2000, you might just wait to see what happens. If you can't, contact the manufacturer, and ask about Y2K compliance. The Readiness of Third Parties Even if you are fully ready for the year 2000, the third parties with whom you both deal may not be ready. Imagine how many others your business interacts with and depends upon: suppliers, subcontractors, consultants, distributors, the power company, the water company, shippers, airlines, banks, messenger services. If any one of them is not ready, that may affect your company's readiness. Federal Governmental agencies report varying degrees of readiness for Y2K, and a good many of them will not make it in time. Most large businesses are working on it, but some won't finish in time, and many small businesses haven't even started. Some of them won't make it on time. What this means is that even if your company is ready, if just one critical third party on whom you rely fails, your company could still be shut down. Consider your third parties carefully. Ask the state of their Y2K readiness, (your lawyer will tell you how you should do this), and take action accordingly. See "A Triage Checklist for the Business Manager," below. Between Now and January 1, 2000 As the time remaining grows shorter, consultants and companies that are working on the Y2K fix are asking clients to sign contracts without warranties or performance standards of any kind, disclaiming any responsibility for anything that might go wrong. And the price of their work is going up. Before you sign any contract with a consultant or programmer, see your lawyer. So far, those people working at it have been working fast and furiously to fix the Y2K problem. Expect a major shift in effort during the second or third quarter of this year. Any urgent, comprehensive re-programming to fix bugs, like the ongoing Y2K fix, is likely to produce bugs of its own. Those that have been working on the Y2K fix will stop reprogramming, and start testing the work that has been done, so they will have time to fix these new bugs. Some commentators predict that the 11th hour shakedown to iron out those new bugs will be so extreme that much of traditional industry will come to a standstill, as companies and governmental bodies try to make sure that what they have done will work. On October 19, 1998, the Year 2000 Information and Readiness Disclosure Act was signed into law, and immediately became effective. Its purpose is to encourage the exchange of information about Y2K readiness. In brief overview, the Act: However, the Act: How to Use the Y2K Disclosure Law Your right to elect protection under the Act for statements and disclosures made before October 19, 1998, expired on December 3, 1998, but you can take steps to assess your situation, and to protect future statements. First, review all communications made beginning on January 1, 1996 to clients, vendors and others to determine whether any Year 2000 statements were made. Second, consult your lawyer to determine whether the statement complies with the Act, and what steps can be taken if it does not. Third, ask your lawyer to tell you how to make a "Readiness Disclosure Statement" that comes under the protection of the new law. Fourth, calendar the dates of applicability of the protections of the Act. Fifth, calendar the date of your receipt of any Readiness Disclosure notice from your vendors or others, and the date 45 days after that. If you relied on their previous notice and would be prejudiced by the retroactive designation of the statement as a readiness disclosure, you have 45 days to object to the notice. III - What To Do - A Triage Checklist for the Business Manager A down and dirty (but not comprehensive) PC test is one you can do yourself if you're not on a network. Set aside a weekend when the office is closed, then begin: * On some computers, you may need software to test the BIOS and CMOS. Some software will also need special test software. See "Resources" below.
This determination will depend very much on your type of business, and perhaps what work is in progress. Start with the work that needs to be done to stay in business. Work first on critical systems; expand to others as time and resources permit. Repair or replace hardware first, then software. Don't forget your programmable devices. If you purchased your hardware or non-compliant software recently, it may still be under warranty. Even if it's not under warranty, the manufacturer may be responsible for the repair pursuant to other contracts or laws, and you may have a cause of action against the manufacturer or others. If you recently purchased the business, including its now non-compliant equipment, you may have a cause of action against the Seller. Your lawyer will be able to advise you. With your lawyer, review your insurance policies to determine if these losses are covered. Review comprehensive general liability, property, business interruption, D & O, and E & O policies, product liability, and any other policies you might have. As the Y2K problem has been unfolding, insurers have been attempting to exclude Y2K issues. But check. Your policy may be one that has not been modified yet, so that Y2K losses are covered. Even if Y2K losses appear to be excluded, don't take what the policy says at face value. In Illinois, the Director of Insurance has sent notice to all Illinois insurers advising generally that blanket exclusions on commercial policies for Y2K losses are prohibited unless supported by valid underwriting data. Since this problem has never happened before, there is no valid underwriting data. Some commercial insurers are sending their customers "surveys" regarding their Y2K status, in an attempt to gather information for underwriting purposes. If you respond, and depending on your response, the insurer may have obtained valid information to assess the underwriting risk, and may exclude coverage. If you don't respond, they may be permitted to terminate your coverage altogether. Each case will be different, and how this requirement will be interpreted, exactly, is unknown. Make a list of all of the third parities upon whom your company relies. Note those that are critical to your company's survival. What do you know about their Y2K readiness? Have you asked them? Have they sent you a Y2K Disclosure Statement? Should you verify what they tell you independently? You might want to consider doing so if their operation if critical to your survival. Is your agreement with them in writing? You might want your contract to include their promise that their Y2K readiness will not interfere with their meeting their obligations to your company. Make sure that you document, in the corporate records, all of the steps taken to analyze and deal with the Y2K problem from the time you first began to work on it. Meeting Minutes of Directors and Shareholders should reflect all of the discussions of the topic, and the plans to take action. Your meetings with Department heads and others may also be evidence of the work you've been doing.Make sure your work is on the record. Depending upon your business and its product or service, you can have an idea whether any third party is likely to make a claim against your company if it fails to achieve complete Y2K compliance. Make sure your insurance coverage is in place. Draft contracts whenever possible, to shift the risk to others. Before the year end, make hard copies of all important data. Retain bank statements and other financial records. Print calendars, important dates. Meet any time-sensitive deadlines before January 1, 2000. Back up all key data before the end of the year, and print it out. Get out those old manual typewriters in case the power goes out, and be in the office over the big weekend. IV Resources Y2K Testing Software Programs & Websites Software Designed to Test (Some are Free) National Software Testing Labs, the standard endorsed by many major hardware makers, will test your PC's CMOS and its BIOS for Y2K compliance. Software can be downloaded from www.nstl.com/downloads/y2000.exe Test2000 from www.rightime.com Millennium/Pro Check from www.unicore.com/milenium.html Get Check 2000 from www.gmt-uta.com/welcome.cfm Websites; Y2K Information & Links to Vendors Peter deJager's Year 2000.com Software Designed to Test Norton 2000; MacAfee's Toolbox 2000; Check 2000; many others Millennium Now promises to correct both the BIOS and the CMOS, but sits resident in memory, taking 5-6 Kilobytes. Software Designed to Test and Fix Shield 2000 - This software/hardware program, recommended to me by my own computer consultant, promises to test and fix hardware, software and even data files, and warrants the hardware fix. For information and a free demo, go to http://www.fennercomputertech.com/pfenner/pages/view/index.nhtml and click on "Year 2000 Info Page." You may need to download the visitor software. Donna J. Cunningham Website: www.bzlaw.com Cunningham & Colleagues, P.C. E-mail: cunning@bzlaw.com 18-3 E. Dundee Road, Suite 208 Barrington, IL 60010 Telephone: 847/381-2200
Y2K for the Business Manager
who has
NO TIME to Deal with Y2K**
Do Not Give Y2K "Certifications" Unless your Lawyer Approves
**PLEASE NOTE: Every effort has been made to provide accurate information regarding Y2K, but I am not a Y2K computer consultant. Please be sure to seek the advice of a computer professional. The information contained in this article is not intended as legal advice. Each legal situation is different. Please see your attorney.