Legal Updates

A shareholder of a company selling its activities without settling its accounts with the employees might be personally liable

September 29, 2017
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Published in Afik News 241 11.10.2017

A restaurant was managed by a limited liability company, which sold the restaurant to a third party before entering into liquidation proceedings. A cook in the restaurant sued the person who was the only shareholder and director of the company for unpaid social benefits, such as severance pay, overtime payment and absence of prior notice of termination.

The Regional Labor Court accepted the claim and personally obligated the shareholder.  The Court held that an employer must notify the employees of change of employer and upon sale of a business perform an account settlement with the employees.  A shareholder who did not do so will not be able to hide behind the separate legal personality of the company (especially when the company is in liquidation) and will be personally liable for the social benefits of the employees.

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