Legal Updates

Even when a corporation negotiates unfairly or with misrepresentations rarely will a manager be personally liable

February 4, 2020
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Published in Afik News 303 26.02.2020

A distributor the agreement with which was terminated by the manufacturer, contended, inter alia, that the manufacturer made misrepresentations that are even fraud, and negotiated in bad faith with it and therefore demanded compensation from the person who served as the company's CEO and as a director and also from the head of business development.
The Court held that the manufacturer acted in bad faith but dismissed the lawsuit against the managers. Officers of a company may be held personally liable under torts or contract law, but in exceptional cases only. In examining the good faith of the officer for the purpose of imposing personal liability, it is not sufficient to prove that the duty of good faith was breached by an objective test, but it must be shown that the officer has a personal, subjective guilt, and not in any case where a corporation is found liable for conducting an unfair negotiation, the manager will be personally liable. The fact that the manager is the one who acted on behalf of the company and the company acted in bad faith is not enough to create personal responsibility for the manager.

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