Legal Updates

A corporate veil may be pierced and a company’s debt will be attribute to a controlling shareholder even if it is not registered at the Registrar of Companies

April 6, 2021

The Israeli Electric Company demanded to attribute a company debt of over ILS 250,000 created due to illegal electricity consumption to the sole shareholder of the company and also to her spouse, who is not registered as a shareholder at the Companies Registrar but was the living spirit in the company and was the one who actually managed the company.
The Court accepted the claim and attributed the company's debt to the registered and unregistered controlling shareholders. Piercing the corporate veil and attributing a company debt to a shareholder is not a routine action and may happen only in exceptional cases where the principle of separate legal entity is abused, such as, for example, use that can deceive a person or deprive a creditor of the company. Here, the identity of the company's real owners was hidden in order to evade the company's obligations and to defraud the Israeli Electric Company. Despite the fact only one shareholder was formally registered as a shareholder and director, her life partner was the real owner of the company and the actual living spirit in the company and the real manager. Because they both knew about the sabotage of the electricity meter, directly benefited from the results of the sabotage and illegal electricity consumption and because they tried to deceive the Israeli Electric Company, the corporate veil is to be lifted and the company debt attributed to them both.