One of the fundamental principles of corporate law – in the U.S., as well as in other countries – is that a corporate entity has a legal existence separate and apart from its shareholders, officers, and directors, and that the individuals cannot be held personally liable for the debts and obligations of the company. However, in a recent extraordinary and noteworthy decision, the Irish High Court, applying Irish law, pierced the corporate veil in finding two Irish directors and two shadow directors personally liable in connection with a multinational fraud scheme. As discussed below, the decision underscores the importance of directors’ duties and their obligations to be informed about their companies’ operations. A copy of the Court’s October 28, 2022 decision can be found here.



For three years, from May 2014 to April 2017, Greymountain Management Limited, an Irish registered company, operated as a middleman in an alleged binary options trading operation. Greymountain, which is now in liquidation, allegedly defrauded would-be investors, primarily in the United States, through means of a call center in Israel. The beneficial owner of Greymountain was David Cartu, whom the court, along with his brother, the court later deemed to be “shadow directors” of the company, and who actually directed the company’s operations.


In addition to the two “shadow directors,” the company had two actual directors based in Ireland, Liam Granger and Ryan Coates. Granger was an experienced corporate director who provided various administrative services for the company. Coates was a student who took the director position at the urging of his mother, was involved in business operations for another company. Both Granger and Coates later claimed that they had no knowledge of the company’s business operations and not involvement with or awareness of the fraud, and that they were directors in name only. The court later said that the company was able to use its Irish domicile to provide a “veneer of legitimacy” for investors as it suggested they were investing in an entity registered and regulated in Ireland and the European Union.


William Powers, an American investor who claimed to have lost over $124,000 in the scheme brought an action against the four individuals seeking an order holding them personally liable for his losses. The four individual directors did not appear for the evidentiary hearing and did not present evidence contradicting Powers’ evidentiary presentation.


The October 28, 2022 Opinion

In a detailed October 29, 2022, Mr. Justice Twomey agreed with Powers and concluded, both with respect to the shadow directors and the two individual Irish directors, that they should be personally liable for Powers’ losses.


Mr. Justice Twomey opened his legal analysis both with a review of the well-established principles under Irish law regarding the legal separation of a corporation from its directors. He also reviewed various statements in the case law of the circumstances in which courts had suggested that the corporate veil could be pierced and the directors possibly held liable. He specifically noted that Irish courts had recognized that directors could be personally liable for the acts of the company, for example, in the case of fraud or the misapplication or misrepresentation on the part of directors, or in the case of directors syphoning off large sums of money so as to leave the company unable to fulfill its obligations.


While emphasizing that that lifting the corporate veil should not be done lightly, Mr. Justice Twomey concluded that on the facts of this case, these standards for lifting the corporate veil had been met. Mr. Justice Twomey also found no reason to distinguish between the shadow directors and the directors when it came to imposing individual liability.


With respect to the liability of the shadow directors, Mr. Justice Twomey concluded that the Cantu brothers had diverted substantial amounts of money from Greymountain, for their own personal benefit and to the detriment of the company. Mr. Justice Twomey found that they could not hide behind the veil of the corporation and found them personally liable. Indeed, Mr. Justice Twomey observed that “if it were to fail to do so in the circumstances of this case,” it would be “an affront to Justice” that would “send a message that companies can use an Irish company to carry out massive international fraud and then evade personal liability.”


With respect to Granger and Coates, the two actual directors, Mr. Justice Twomey was at one level very sympathetic with their plight, given that they had no involvement in or awareness of the fraud and that they received no benefit other than their standard directors’ fees. However, he also noted several key considerations about their performance of their directors’ duties: they had failed to inform themselves about the nature of their duties as directors (or if they did, they ignored those duties); they failed to acquaint themselves with the affairs of the company; and they failed to exercise appropriate supervision or oversight at the board level. On the bases of these considerations, Mr. Justice Twomey concluded, while expressing sympathy for the circumstances in which they find themselves, that this is the “exceptional case in which the corporate veil should be lifted.”



The court’s decision was of course decided under Irish law and reflects the quite distinctive factual aspects of the case. Nevertheless, the decision has important lessons for corporate directors, regardless of the jurisdiction in which their company is incorporated and regardless of the differences between their company and the circumstances involved in this case.


First and foremost, this case is a stark reminder that directors have duties to their companies and they must take actions to fulfill those duties. More to the point, individuals cannot take on the director role without exercising appropriate control and oversight. Directors cannot simply turn the company over to its operators and otherwise disregard the company and its operations.


Second, and an important corollary of the first point, as expressed in a December 2, 2022 memo from the Maples Group law firm (here), “regardless of the level of experience, directors must be sufficiently informed of the company’s operations and business in order to discharge their legal duties.”


Third, as Mr. Justice Twomey found, as fundamental as the corporate veil is, it cannot operate as a shield to protect directors from personal liability when justice requires. As the authors of the law firm memo put it, this case is a “stark reminder” that “directors may be made personally liable for losses suffered as a result of a company’s fraudulent activities and where the interests of justice require it.”


The court’s opinion does not address D&O insurance issues nor is it apparent whether the company here had D&O insurance. (The facts and circumstances involved suggest that it did not.) The facts as adduced by Mr. Justice Twomey suggest that while the shadow directors engaged in a massive fraudulent enterprise, and Mr. Justice Twomey seems to have so found, he also concluded that the two Irish directors were uninvolved in and unaware of the fraud.


Under principles of non-imputation found in many D&O insurance policies, these two individuals could well seek to argue (if there had been D&O insurance in place) that the fraud here could not be attributed to them and that the fraud exclusion should not operate to preclude coverage for them. Since there does not appear to have been D&O insurance involved in this situation, this is a purely hypothetical analysis, but the analysis does suggest that D&O insurance might provide important protection, even in circumstances in which the corporate veil is pierced to impose personal liability on corporate directors.