Jurisprudence is becoming less reserved regarding piercing the corporate veil
In the case, the plaintiffs were buyers of apartments who demanded a purchase price reduction due to material defects to the apartments. The facts of the case were as follows: the defendant (a physical person) purchased real estate to construct an apartment building. The defendant founded the company A. llc, in which he was also only shareholder and director. The defendant acquired the building and occupancy permit in his own name. Once construction was completed, he sold the real estate to A. llc, and the company then concluded sale-purchase agreements for the apartments with end buyers. Soon after the sale of the apartments, material defects began appearing in the apartments, whereas the buyers notified the seller of the defects in due time. Subsequently, the defendant transferred his share in the company A. llc free of charge to a new owner. The plaintiffs initially filed the claim against the stated legal person as well, but the company was deleted from the court registry without liquidation before the end of the first instance judicial proceedings.
The Supreme Court held that the case at hand concerned a “textbook case” of abuse of a legal person under Article 8(1)(2) of ZGD-1, which stipulates that shareholders are also liable for a company’s obligations if they abused the company as a legal person to cause damage to their or the company’s creditors. The Supreme Court stated that this conclusion is evident from (among other things) the following circumstances: the defendant knew the apartments had several defects and that the buyers would file warranty claims against him if he sold the apartments as a physical person; in order to avoid that, the defendant transferred ownership of the real estate to the company and sold the apartments through the company; during the litigation proceedings the defendant disposed of the company free-of-charge and the company was deleted from the court registry before the first-instance proceedings concluded, which is why the creditors had not chance of succeeding with their claims against the company.
The Supreme Court judgement is a welcome instance of an expanded application of the institute of piercing the corporate veil in Slovenian jurisprudence.
