Legal Updates

Deposit of clients funds into the company’s regular account may result in personal liability to managers

January 4, 2019

A company that provided car sale services entered liquidation proceedings and did not pay the owner of the sold vehicles the proceeds of the sale. The owner demanded the money personally from the company manager.

The Court accepted the claim against the manager and held that he is personally liable for paying for the vehicles. While a company is a separate legal entity from its managers and shareholders, the fact that a person is an organ of a company does not create an immunity and one may have a personal liability for one's actions, in addition to the company's liability. The funds received for the sale of the vehicles were transferred by the manager to the company's general bank account that was used by it for its current expenses, instead of holding such in a separate bank account, and this action, especially when the company was in financial difficulties in the last period of its activity, constitutes negligence that establishes a tortious cause against him personally, even if the purpose of this was not to divert funds away from creditors.