The Court held, that it is a fundamental principle of corporate law that the company is a separate legal entity from its shareholders and its actions and obligations will not be identified with the actions and obligations of its organs. In general, an officer of the company or its owner will not be personally indebted for debts of the company. Deviation from this principle will be made only in exceptional circumstances and in cases where it was proven that the separate legal personality was used to circumvent the law or discriminate against a person, such as gaining a benefit by the organ by fraud, concealment of assets, mixing properties or the sort.
In the present case the company encountered financial difficulties and the shareholder operated to divert company funds in order to avoid rights of creditors, including by issuing invoices under the shareholder’s name and receiving funds for company’s projects.