A municipality filed a lawsuit in respect of city tax debt and claimed that the shareholders and directors of the companies holding the property should be personally accountable.
The Court held that in order to collect the debt from the controlling shareholder in a company, it is necessary to show the existence of the following conditions: a. The charge is in respect of a non-residential property; b. The debt is final; C. The Company has not paid its debt; d. The company ceased to operate; e. The defendant is a controlling shareholder; and f. The defendant took over the assets of the Company for partial or no consideration. An officer of the company who is not registered as a shareholder can be held accountable for the company’s property tax debts under certain conditions.
It was proven that the companies holding the property were replaced frequently and it was determined that it was done in order to avoid compulsory payments and therefore it is abuse of the corporate veil. The Court decided to hold the controlling shareholders and other managers, which were the “live spirit” in the company, personally accountable for the companies’ debt despite the fact that they were not registered as directors at the Companies Registrar