The Single-member Court of First Instance of Athens with the no. 10583/2021 definitive Decision of, on a case handled by our office, accepted a lawsuit requesting the removal of the legal personality of an anonymous company, obliging the shareholder company to pay the plaintiff the amount of 85,595 euros.
In particular, the Court held that “this principle of the financial independence and responsibility of the legal person of the company vis-à-vis its shareholders or partners recedes when the invocation of its different personality serves to legitimize an effect contrary to the rules of good faith, i.e. when the actions of the company are in fact actions of its dominant shareholder or partner that are intentionally varied or vice versa when the actions of the natural person are consistent with the company from which it is unfairly attempted to be cut off“.
This form of abuse of the institution of the company manifests itself mainly in cases where the dominant shareholder or partner uses the legal personality of the company to circumvent the law (bypassing obligations that bind him as a natural person) or to fraudulently cause damage to a third party (therefore his tortious liability will also arise) or to avoid the fulfillment of either his corporate or individual obligations, which were created in excess of his actual corporate or individual capabilities.
Next is the no. 10583/2021 definitive Decision of the Single Member Court of First Instance of Athens.
COURT OF FIRST INSTANCE OF ATHENS
REGULAR PROCEDURE
COMMERCIAL DEPARTMENT
Decision number
10583 /2021
THE SINGLE-MEMBER COURT OF FIRST INSTANCE OF ATHENS
It was formed by Judge Vassiliki Papagianni, First Instance Court, who was appointed by the President of the Three-Member Board of Directors of the Court of First Instance and by the Secretary Aristotelis Panagiotou.
He sat in public in his audience on 12.05.2021 to try the case between:
OF THE PLAINTIFF: …. who submitted motions through his attorney Thomas Kalokiris, without appearing in Court after or through a legal representative.
OF THE DEFENDANT: an anonymous company with the name of …….., which submitted proposals through its attorney, without appearing in Court after or through a judicial attorney.
AFTER STUDYING THE LITIGATION
THOUGHT ACCORDING TO THE LAW
[…]With the provision of art. 70 of the Civil Code, which stipulates that "judicial actions undertaken within the limits of its authority by the body managing the legal entity oblige the legal entity", establishes as a basic principle of the law of legal entities, their property independence vis-à-vis their members and vice versa, which and is a defining element of their constitution. However, this principle is waived exceptionally, when the aforementioned separation is not tolerated by law, either directly on the basis of a relevant provision of the law, or in good faith as reflected in articles 281, 288 and 200 of the Civil Code, i.e. when the independent existence of the legal entity is abused, in which case the removal of its property independence is concluded. The cases of abuse of the autonomy of the legal person take many and varied forms in corporate law, and it is possible to appear both during the establishment stage and during the operation stage of the legal person. The concentration of most or all of the shares of a joint-stock company or the shares of a limited liability company in a single person does not constitute, in the above sense, abusive behavior, even if this person is the managing director or the manager of the company and thus controls it formal and substantive (OlAP 5/1996). It also does not constitute abusive behavior the choice of a capital company to carry out business activity through it by one of the majority of entrepreneurs with the aim of the company acting as a mechanism for absorbing any adverse consequences of their business activity, nor also the identification of the company's interests with them of its Principal shareholder or partner or the systematic provision by them of guarantees in favor of the company, nor the appearance of them as the essential operators of the business carried on by the company, since the company ultimately serves the interests of these persons, which with the provision on their part of guarantees on behalf of the company respectively ensure their own interests in a legitimate and secure way. In all these cases, in which no abuse is found during the operation of the company thermal, the independence of the company as a legal entity is preserved. However, this principle of the financial independence and responsibility of the legal entity of the company vis-à-vis its shareholders or partners recedes when the invocation of its different personality serves to legitimize an effect contrary to the rules of good faith, i.e. when the actions of the company are in fact actions of its dominant shareholder or partner that are deliberately varied or vice versa when the actions of the natural person are continuous with the company from which it is unfairly attempted to be cut off. This form of abuse of the institution of the company manifests itself mainly in cases where the dominant shareholder or partner uses the legal personality of the company to circumvent the law (bypassing obligations that bind him as a natural person) or to fraudulently cause damage to a third party (therefore his tortious liability will also arise) or to avoid the fulfillment of either his corporate or individual obligations, which were created in excess of his actual corporate or individual capabilities, and criteria indicative of such abuse are mainly the insufficient financing of the company and the confusion of the corporate with his personal property, since due to insufficient financing the entrepreneur unlawfully transfers to the company's creditors the risks from his own essentially business activity, while unlawfully also in the case of confusion of assets he uses the company's property for his own activities or conversely, the company benefits at the expense of its individual creditors. Certainly abusive is also the behavior of the Principal shareholder or partner who transacts as a substitute for the company, when the company does not have a corporate organization or has not developed a business activity and he is the one who in essence transacts under the corporate name for his own benefit. In all these cases, as a sanction imposed to avoid abuse, the lifting or curtailment of the legal personality of the company and the extension by the company to the shareholders or partners of the consequences concerning it or vice versa the extension of the corresponding consequences by the shareholders or partners are appropriate in the company, in particular when the third parties, who entered into a contract with the company or its Principal shareholder or partner, were led to the specific transaction due to the changed situation appearing to them. In any case, however, the removal of the autonomy of the legal entity is temporary and limited, that is, the legal personality of the company itself is not catalyzed, but its property autonomy is set aside only for the specific transaction, with | meaning that the company or, accordingly, its Principal shareholder or partner remain debtors, who are now jointly and severally liable for the damaging consequences of their transaction, i.e. it is created an additional debtor, to whom these consequences are extended (diffused) either from the company to the Principal shareholder or partner or vice versa (OlAP 2/2013, AP 537/2016 LAW). In view of the above, for the removal of the independence of the legal person - capital company, it is not enough just to have the status of the natural (or legal) person (who is the sole shareholder or the owner of the majority of the shares) as a Major shareholder, but neither the fact that the existence or continuation of the company depends on the participation of this natural (or legal) person in the company, but the assistance of specific facts is required, which demonstrate a Will to circumvent the provisions concerning legal persons.
With his current action, the plaintiff claims that he founded with the defendant the joint-stock company with the name…… with an initial capital of 300,000 euros and the object of work …….., that throughout the operation of the above-mentioned joint-stock company he owned the position of the Managing Director of the company's Board of Directors and the manager of the store with a percentage of participation in the share capital of 3.85%, while the defendant was the main shareholder with a percentage of participation of 96.15%. That, at a meeting of the regular general meeting of the shareholders of the above-mentioned company, which took place on 30-6-2011, it was decided to increase the share capital by the amount of 156,000 euros, while it was followed by an amendment of its articles of association. That, in the context of covering the increase in the share capital, he gradually paid the total amount of 85,595 euros into the coffers of the above-mentioned anonymous company, but the increase in the share capital was canceled by the decision of the general meeting of 23-5-2012, as a consequence that the reason for which the above sum of money was given does not continue. That, despite his complaints, the defendant does not return the above amount to him, since the property and legal independence of the above-mentioned limited liability company vis-à-vis its members and specifically vis-à-vis the defendant, given that she is a lady, a notary and holder of 12499 registered shares of the anonymous company with the name of ….., with a percentage of participation in its share capital of 96.15%, which makes it its dominant and almost sole shareholder, that it exclusively manages the trademark, the use of which it has granted to the above corporation by virtue of a franchise agreement (franchising), that together with the company ... constitute the exclusive suppliers of its products, that the Board of Directors of the above corporation is composed exclusively of executives and employees of the defendant, that since its foundation the defendant with its dominant participation in the share capital and management is a cornerstone regarding its creditworthiness vis-à-vis banks and other creditors, that the defendant was under-financing it and that it was using it as a surrogate.
Based on this background, he requests that the legal personality of the anonymous company with the name ... be removed against the defendant and that the latter be obliged to pay him the amount of 85,595 euros, with the legal interest from the service of his previously filed lawsuit, due to unjust enrichment, additionally according to the provisions on recognition of debt. With this content and requests, the action in question is admissibly introduced to be discussed before this Court, which is competent in terms of content and location (art. 14 par. 2 and 25 par. 2 of the Civil Code), to hear it according to this regular procedure and it is certain and legal, in terms of its main Basis, based on the provisions of articles 70, 904 et seq., 346 AK, and 907, 908, 176 KPolD.
[…] There is no objection against the action under consideration, which can be examined ex officio, while for the facts mentioned in its petition, the confession is allowed. Therefore, the action in question must be accepted, as in essence, valid and the defendant must be obliged to pay the plaintiff the amount of eighty-five thousand five hundred and ninety-five (85,595) euros, with the legal interest from its service from 06.08 .2012 of a previously filed action and until full payment, because, since the defendant sues in default, the real allegations contained in the legal document are fully proven, given that they are considered as admitted by the defendant in default, in accordance with the provisions of articles 271 par. 3 and 352 par. 1 of the Civil Code. [...]
FOR THOSE REASONS
TRIED in the defendant's absence.
DEFINES the default fee payable in advance in the amount of two hundred and fifty (250) euros.
ACCEPTED the lawsuit.
MUST the defendant to pay to the plaintiff the amount of eighty-five thousand five hundred and ninety-five (85,595) euros, with the legal interest from the service of the previously brought lawsuit from 06.08.2012 and until the payment.
IMPOSE to the defendant the court costs of the plaintiff which he sets at the amount of three thousand four hundred (3,400) euros.
Thomas Steph. Summer
MDE lawyer
Min. Doctor of Law, AUTH
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