Legal Updates

Piercing the corporate veil will be in extraordinary cases and is not the main path

December 17, 2020

A middleman sent an email to a company manager stating that the cost of his services is a monthly retainer and percentage of transactions to be signed. The company manager agreed by email. Nevertheless, when the company refused to pay, inter alia because the signed merger transaction did not include any payment but only a merging of the two companies, the intermediary sued the company and the company's shareholders and director.
The Court held that the emails constitute a binding agreement, but the director and shareholders are not personally liable. An e-mail that was confirmed is a binding agreement and because the language of the agreement is clear there is no room for another interpretation. However, in the signed merger transaction, no actual funds were exchanged but only an activity merger when each party received half of the merged company. Therefore, the merger value for payment of the middleman fee is to be calculated as the saving on operating expenses resulting from the merger to the company that agreed to pay the fees, where the savings should be multiplied by a multiplier of 4, which is the multiplier the parties saw as the way to calculate their company value for the merger. Shareholders and directors are not personally liable because personal liability will only occur in the most unusual cases of usurping the corporate veil and certainly not when it is evident that the company has struggled to continue its operation and pay its debts and not to evade payments. The fact that managers were in contact with a third party on behalf of the company does not create a personal responsibility for all company obligations.