A creditor of the company sought to personally obligate a shareholder for all debts of the company a shareholder who also founded a new company and transferred to it the activities of the company and who also admits to have held the shares for his bankrupt son.
The Court held that although a company is a legal entity separate from its shareholders, in some cases the Court will "lift the veil" of the corporation and obligate the shareholders in the Company's debts. This will be done where the shareholder misused the separate legal personality of the company. Sometimes serial establishment of companies without a legitimate economic rationale will constitute abuse of the incorporation, as in the case of emptying a company and transferring its assets to a new company in order to avoid paying debts. The new company will be considered an incarnation of the previous company and the veil between them may also be raise.
When a straw man is used to hide the true ownership of a company the straw man will be personally obligated to bear the debts of the company. Lifting the corporate veil is possible against a shareholder even if the shareholder was not aware of the use made of the company's legal personality but was suspicions but did not investigate. For this reason, the Court found the shareholder personally responsible for the entire debt of the company.