Legal Updates

A controlling shareholder might be personally liable for the corporate’s city tax debt if it keeps silent

July 20, 2019

A local authority demanded that a shareholder will be personally liable for the company's property tax debt after the company entered liquidation.
The Court accepted the claim and ordered the shareholder to personally pay the debt as he was the controlling shareholder of the company. Israeli law sets that the corporate veil may be pierced, and a shareholder be personally accountable for company's city tax debt if: A. The Tax is final; B. The company ceased operations and did not pay its obligation to the local authority; C. The person is a controlling shareholder; D. The shareholder received, directly or indirectly, the assets of the company without consideration or in part; E. The property is not used for residential purposes; and F. There is bad faith and diversion of assets. Here, all conditions were met and the shareholder's claim that that the debt was not final was rejected due the fact that even though he was well aware of the company's debt and the possibility of being personally liable for it, he failed to argue against it despite a number of opportunities given to him.