Legal Updates

The corporate veil will not be pierced when the shareholder acted to rehabilitate it and pay its debts

November 12, 2019
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A company was liquidated and a new company was established with the same activity in the same place and with similar shareholders. An employee of the liquidated company demanded that shareholders will be personally liable for her social right.
The Court dismissed the employee's claim against the shareholders. An employee is not a "voluntary creditor" but a special type of creditor who is entitled to an increased responsibility and a special duty of trust. However, the corporate veil will be ignored only in cases where the employer conducted its business with a blatant disregard for the basic duty towards the employees, and in a manner that posed an unreasonable risk that the company would not be able to pay its obligations to the employees. Establishing a business that continues the business of a failed company while draining its assets is grounds for piercing the corporate veil. However, here the shareholders did everything they could to rehabilitate the company and minimize the losses and raise financial resources for continuing its operation while continuing to pay employees their salaries in a timely manner. Thus, the Court rejected the personal claim against the shareholders.