Legal Updates

The doctrine of piercing the corporate veil applies also to not-for-profit societies

November 14, 2017

A lender of money to a not-for-profit society, which ceased operation, and when the sum was not repaid, sued not only the society but also seven people who were registered as its founders.

The Court found the society responsible but not its founders and held that a not-for-profit society is a legal corporation with a separate and independent legal personality established by virtue of the Societies Law. While the doctrine of piercing the corporate veil does not appear in the Societies Law, caselaw applied it also to non-profit societies and they are not immune from piercing the corporate veil in case of misuse of the corporate veil. In this case, the founders did not actually run the association and the individual who did serve as a manager is not personally responsible for debts that he did not personally guarantee.