My question is regarding the debts of a limited liability corporation that has been declared bankrupt. By the country’s laws debts to other companies are paid from remaining assets if there are any, except where personal surety has been signed. If there are no assets left to pay the creditors, and some of these creditors who have lost their money are owned by Jews, is there a personal obligation to pay the debts?
Answer:
Anybody who gives a loan to a limited liability corporation knows that the managers, directors and shareholders of the company do not have personal liability for loans. Several authorities see this arrangement as an “apotiky,” whereby the debt can only be collected from company assets (see Rav Zalman Nechemya Goldberg, Ha-Maayan 45:4 p. 48; see also Shevet Ha-Levi 8:306, though there is room to distinguish between a small company and a large corporation).
Moreover, Rav Moshe Feinstein (Choshen Mishpat 2:62) writes that for purposes of bankruptcy we follow the law of the land – though others dispute this (see Pischei Choshen, Halvaah Chap. 2, note 63).
The shareholders of the corporation can therefore rely on those opinions who do recognize the validity of a corporation in general, and the concept of bankruptcy in particular, so that they won’t have to pay out the debt.
Please see also here (and sources at the beginning of the article) for a short analysis of corporations in halachah.
Best wishes.
