Legal Updates

Managers of a company that was voluntarily liquidated will be personally liable for debts even if the company disputed such

April 22, 2019

A hired travel agent resigned after suffering humiliating treatment and the Labor Court held that she is entitled to severance pay even though she resigned. During the legal proceedings, the company entered into voluntary liquidation and shortly after the employee was awarded compensation in her proceedings against the company, the company was liquidated.
The Court held that both the company's liquidator and the managers who signed the affidavit of solvency as part of the liquidation process are personally responsible for paying the severance pay of the employee. Voluntary liquidation of a company is carried out without the involvement of the company's creditors and is only possible where the company can repay any debt, even if it is a debt that the company disputes. Insofar as the Company is unable to pay all its debts in full at the time of entry into the liquidation proceedings or if the liquidator discovers debts beyond the capabilities of the company within the liquidation process, the Company must be dissolved by a legal proceeding involving the Company's creditors. Here the managers and the liquidator knew of the existence of a procedure at the Labor Court and had to set funds aside to cover any amount that might be held in favor of the employee. When they do not, they are personally responsible for paying the amount to the employee.