Legal Updates

A single shareholder and director of a company may be personally liable for company’s debts if shut his eyes and was oblivious thereto

March 19, 2020

A company with a single shareholder who was also the sole director therein contracted a telecommunications company while its economic situation did not allow it to consummate the contract and therefor the telecommunications company sought to personally charge the sole shareholder.
The Court held that even if the shareholder is not the one who signed the contract, she is personally liable for the company debt. A company is a separate legal entity and, as a rule, piercing the corporate veil will be scarcely used, but when it comes to a single-holder company, even if the shareholder was not the one who signed the contract, it must be familiar with what happening in the company, including the fact that the company entered an agreement or was charged with a payment and when the shareholder notice that a charge was created he must research the reason for its creation. Here, the company has a single shareholder who is also the sole director and the sole signatory at the company's bank account and although she did not personally sign the contract she is personally liable for the company’s debt because she was oblivious to the debt and shut her eyes even when she discovered it.