Legal Updates

A shareholder cannot contend personal damage if another shareholder also suffered damage and it is not a specific damage caused only to him

August 25, 2022

One of two shareholders in a company contended to have suffered personal damage due to the other shareholder entering into agreements with the company which were made behind his back and without his knowledge and that he never received the consideration for them.

The Court rejected the claim and held that the damage caused is damage to the company, and not personal damage to the shareholder. A shareholder can contend damage caused to him by another shareholder, only when the damage caused is direct damage to the specific shareholder. This principle has several exceptions: Damage caused to the shareholder as a result of a breach of a contractual right towards him; Damage caused due to the oppression of the minority and the damage caused to the shareholder is different than the damage caused to the other shareholders. Here, all damage was inflicted solely on the company, which did not receive funds for the transactions. In addition, none of the exceptions are met: Because the shareholder owns 50% of company shares he has control and does not constitute a minority; The other shareholder was also damaged by the sale of the assets and because the controlling owner was not a party to the transactions, he cannot contend a breach of contract. Therefore, the shareholder suffered no personal damage.