Apartments purchasers in a TAMA 38 project in Herzliya, received possession of the apartments over two years late. The purchasers moved to receive their statutory compensation from the shareholder in the entrepreneurial company by virtue of piercing the corporate veil and due personal liability as an officer, as the entrepreneurial company had no other activity and did not own assets or property.
The Court rejected the claim against the shareholder and held that there is no justification to pierce the corporate veil or to impose personal liability. Piercing the corporate veil is an extreme and far-reaching remedy, which should be used very carefully and in exceptional cases only. In order to impose personal liability on a company officer, it is not enough that it was the living spirit behind the company, but it must be shown that it committed a tortious wrong or acted in extreme bad faith amounting to "subjective personal fault.” Here, there was no doubt that the apartment purchasers were entitled to compensation from the entrepreneurial company due to delays in the project. However, the company was not used to defraud the apartment purchasers or to deprive them, or while taking an unreasonable risk regarding the company's ability to pay its debts and no personal wrongdoing was committed on the part of the shareholder. Therefore, there is no place to pierce the corporate veil nor hold the company officer personally liable and the company solely will pay the compensation due to the purchasers.