Legal Updates

A manager who transacted knowing that the company will not be able to manage the transaction will be personally liable.

December 21, 2017
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Published in Afik News 247 03.01.2017

A sole shareholder of a company ordered goods from another company in high amounts while creating a debt in respect of the goods supplied. The supplier sought to pierce the corporate veil and attribute the company's debts to its only shareholder and manager, arguing that he transacted knowing that the company will not be able to pay for the goods supplied.
The Court held that not any mismanagement of a company will justify piercing the corporate veil and not any breach of contract by a company will lead to the imposition of personal liability on the officers. However, an officer is not immune against breach of duty under law that he committed, only because he acted as an organ of the company. Here, the shareholder managed the company with taking risks regarding the company's ability to repay its debts, while being aware of this. Therefore, the Court ordered to pierce the corporate veil and attribute the company's debts to its sole shareholder.

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