Legal Updates

Delay in depositing employee pension payments does not automatically justify piercing the corporate veil

December 7, 2020

A company employed an employee and deducted from the salary payment to a pension fund but failed to transfer such to the pension fund in real time. The employee demanded, inter alia, to hold the shareholders personally accountable for the company debt to him.
The National Labor Court held that the fact that a company is not solvent does not justify by itself piercing the veil of incorporation between it and its shareholder. Shareholders may be held accountable for company debts when the incorporation veil is misused. However, even when an employer does not fulfil its obligations under law with regard to the payment of employee wages and the issuance of wage slips, the incorporation veil between the shareholders and the company should not be pierced as a general principal. Here, all the funds that were deducted from the employee's salary for the pension were transferred to the pension fund only after the filing of the claim and the company ceased operations due to business failure and not due to misuse of the incorporation veil. Therefore, the failure to make timely deposits to the pension is not sufficient to justify piercing the corporate veil and holding the shareholders personally accountable.