The breach of the duties of the officers towards the company gives it legal status to stand guard over its interests and to sue for the enforcement of their duties, compensation for their breach and the restitution of profits (Deri case, at paragraph 102). The law also establishes a status for shareholders to file derivative and class actions, and in appropriate cases, establishes a rivalry between them and the officers, who are alleged to have breached their duties.
Anyone who takes it upon himself to serve as an officer of the company must be prepared to be held accountable for his actions in its affairs, in the relationship between him and the company and with its shareholders. Indeed, the general law grants protections to officers, including the protection of the business judgment rule, which I will refer to below (see below in paragraph 126 onwards). Still, this defense and other defenses that can stand on the right side of the officers do not negate the status of the company, and in appropriate cases the shareholders, to raise their claims against them, and the legal rivalry that exists between them.
- The case before us raises a different perspective, which is not internal to society but external to it. Here comes a third party, which is not part of its organs or its inner world. He came into contact with the company, and according to him, he "peeked in and was hurt." He explains that the company breached a contractual obligation to him or tort in tort and caused him damage.
In such a situation, the obvious position, which is about to clarify its arguments, is vis-à-vis society. He can sue her in a contractual claim or in a tort claim. The rivalry that has arisen between him and society is also clear and obvious.
But does he have the legal standing to sue the company's internal officers directly and attribute personal liability to them? Did a rivalry arise between him and them? The positive answer is not automatic and is not required at all. This is where legal policy considerations come into play.
- To the extent that he is given the status to sue in an easy manner, and to the extent that the establishment of the rivalry is a trivial matter, the overarching principle of the separate legal personality will be fatally harmed. One must be careful not to drag the organs of companies and officers in them as personal defendants, new from time to time, into legal disputes that come and go as a result of the activities of those companies.
Since business activity often involves business disputes, allowing officials in the company to easily sue may lead to a chilling effect. Who would want to promote moves on behalf of the company in the amount of millions and tens of millions of shekels, if he himself bears personal responsibility for them - he and not the company? The imposition of unrestrained personal liability therefore entails the fear of harm to the officers' activities, to corporate activity, and as a result, to the normal business life.