Legal Updates

A shareholder who builds a business on the ruins of a company business may be liable to the other shareholders for their pro rata part

February 12, 2023

Shareholders in a company which operated an event hall demanded that the other shareholder, who served as the actual manager of the company, will compensate that for opening an event hall in the same location after the closing of the company business, under a new company which he holds.

The Court held that the other shareholder coveted the reputation and equipment of the company and therefore must make restitution. The principle of restitution for unlawful enrichment made at the expense of the other party states that when a party is enriched, at the expense of the other, without a right under the law, then such party must make restitution. Here, the other shareholder hid his involvement in the other company with the intention of preventing the shareholders from receiving their share and therefore he must be ordered to make restitution in accordance with the market price that reflects the appropriate price for the reputation of the business and its equipment which were actually paid.