The chairman of the panel was of the opinion that these circumstances explain Lorenzi's testimony that "I see the breach as a normal business course that has a certain probability that it will happen in advance, and therefore I make sure to take very good collateral in advance when there is a violation, insofar as it may be, as far as I am concerned, I am not in a state of risk" (paragraph 43 of the decision). In light of the above, the Chairman of the Panel was of the opinion that the failure to immediately report the breach of the loan agreement by the borrower, which was a minor breach in the circumstances of the case, did not and could not have had any material impact on the company. Therefore, the respondents should be exempted from this violation.
The chairman of the panel also rejected the ISA's claims regarding the two additional violations.
- Prof. Kobi Kastiel and Adv. Yael Dekel-Shafrir (hereinafter: Kastiel and Dekel-Shafrir), the panel members joined the position of the panel chair and added comments regarding the question of the materiality of the information relating to the breach of the loan agreement.
The two insisted that the information being examined was a partial payment of the interest payments for the large loan in the months of August-September and non-payment of the interest in the months of October-December, as well as non-repayment of the small loan. In these circumstances, the two members of the panel believed, that the scope of the actual violation, is not substantive. In other words, the impact on the company's financial situation, in and of itself, is not material (paragraph 5).
Kastiel and Dekel-Shafrir were of the opinion that even if the sums that were not paid on time were not material from the company's point of view, it could be argued that the information about the breach of the loan agreement should be viewed as a "signal" of the respondent's financial situation and the risks to which it is exposed. We also noted that this is the only loan granted by the company to any party during the relevant period, and its amount is significant in relation to its equity. In view of the centrality of the loan to the Respondent's activity, a violation of its terms, even if on a limited scale, is liable to signal a risk to the repayment of the entire loan, and hence to a significant harm to the company's economic strength.