What the court clarified
The court distinguished abuse of limited liability by a shareholder from fiduciary duties of a director, under the law then applicable.
May the tax authority recover an LLC’s unpaid tax directly from its shareholder or director solely because the company cannot pay?
For a demand against an individual, distinguish the company’s debt, the conduct attributable to the shareholder, the director’s particular decision and information available at that time, and causation. Relevant records may include corporate minutes, transactions with related parties, bank flows, accounts and the tax audit report. Holding office is not by it…
Continue reading belowMaterial facts
Two related appeals concerned attempts to recover corporate tax liabilities from owners and management personally. The Revenue Service relied on a general tort provision; the court analysed the different legal capacities and duties of the company, shareholders and directors.
Court reasoning and holding
Limited liability is the starting point, not a shield for abusive use of the corporate form. An individual shareholder’s responsibility requires proof of abuse, including deployment of the company as an instrument for tax evasion. The claimant bears the burden of proving the abuse. A director is judged under the duty of care and loyalty; illegal tax concealment cannot be insulated by the business-judgment principle. Inability of the company to pay, on its own, is insufficient.
Practical application: what to examine
For a demand against an individual, distinguish the company’s debt, the conduct attributable to the shareholder, the director’s particular decision and information available at that time, and causation. Relevant records may include corporate minutes, transactions with related parties, bank flows, accounts and the tax audit report. Holding office is not by itself a cause of action.
Limits of the precedent
The judgments apply an earlier version of the Entrepreneurs Law. Article numbering and the present framework must be verified separately.
Provisions considered by the court
Historic Law on Entrepreneurs articles 3(6), 9(6); Civil Code 992 considered
Historic provisions cited by the court may differ from present law. Consult the official legislative gazette for the current text. matsne.gov.ge
Read the primary decision
The note is grounded in a published Supreme Court explanation and decision. Review the full document when checking its reasoning, procedural outcome and factual context.