A company was closed when it had city tax debts. The authority demanded that the controlling shareholder of the company pay the debt on the grounds that assets of the company were transferred to him.
The Court held that a control holder cannot be obligated to pay the city tax debt without first showing that the company had assets. In the case of a company that closes or ceases its activities when it has tax debts, the law’s "presumption of smuggling" includes a basic assumption that in the event that the company had assets, these were transferred to the controlling owner against no consideration and therefore there is justification to pierce the corporate veil and collect the debt from the controlling owner who benefitted from receiving the assets. In such a situation, the burden of proving that the transfer of the assets was not carried out, or was done against a proper consideration, is on the controlling owner. However, in order to establish this basic premise, the authority must show, at least in a preliminary and most basic way, that the company had assets to begin with and such may have been transferred to the controlling owner. Here, the authority did not show actual assets, but indicated, even if in a preliminary and indirect way, the existence of some assets, and therefore the controlling owner, who has the exact data regarding the company's assets, needs to show that no such assets existed.