LABOR COURT: A SUBSTANTIAL CONCERN OF INABILITY TO PAY SALARIES MAY GIVE RISE TO PERSONAL LIABILITY OF THE CONTROLLING SHAREHOLDERS

The Israeli Regional Labor Court has found that under the good faith doctrine, an employer must evaluate its anticipated ability to meet its obligations towards its employees. To the extent that an employer is aware of a substantial concern that the corporate entity will fail to meet such obligations, it must avoid further employment of these employees.

 

Where the controlling shareholder is responsible for the disorder in the company’s financials, and the above good faith doctrine in not followed, the principles of good faith and public interest justify broadening the doctrine of limited liability, and levying personal liability onto the controlling shareholder.

 
This Newsletter has been prepared by Y. Ben-Dror Law Offices for informational purposes only and does not constitute legal advice. This Newsletter is not intended to create and the receipt of it does not constitute an attorney-client relationship. Readers should not act upon this Newsletter without seeking professional counsel. For further information concerning the above, please contact Yossi Ben-Dror.