Legal Updates

A person signing an agreement on behalf of a company without a stamp does not create a personal liability for the company’s obligations under the agreement

February 7, 2021

A landlord of a company demanded the payment of the rent both from the company, which went bankrupt, and from the shareholder in it, including because he signed the lease agreement himself and without the company's stamp.
The Court dismissed the lawsuit against the shareholder. The mere fact that the shareholder signed the agreement without the company's stamp does not create personal liability when it is clear from the wording of the agreement that it is with the company and not with the shareholder. The use of the procedure of piercing the corporate veil and charging a shareholder for the company's debts is an extreme and far-reaching remedy, which should be used very carefully in exceptional cases and not as a matter of routine, as it means the abolition of the company's separate legal personality and retrospective change of the legal rivalry. This tool will be used in exceptional cases where the use of the separate legal entity is done in a way that is to deceive a person or deprive a creditor of the company, or in a way that harms the company purpose and while taking an unreasonable risk as to its ability to repay its debts. Here the shareholder did not act to defraud creditors and vice versa, injected funds into the company when it went bankrupt in order to save it.