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24 December, 2015

Is Limited Liability Always "Limited"?

The Supreme Court ruled that the grounds for liability of the shareholders and the direc¬tors are inherently different, given their dis¬tinct status. According to the Supreme Court, the shareholders may be held personally liable (piercing the corporate veil), based on article 3.6 of the Law of Georgia on Entrepreneurs, ifthey misuse corporate forms of limiting lia¬bility. The Supreme Court broadly interpreted said clause, stating that personal liability could rise not only from the misuse of the corporate form, but also as a result of abusing limited liability. As the Supreme Court states, such abuse of corporate power is in place when the shareholder orchestrates activities aimed at tax evasion and the company is used by the shareholder as a tool for originating un-declared income. The burden ofproof in such a case is on the plaintiff. 

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