Section 94 of the Company's Articles of Association stipulates that "the Company shall not generate profits, and if surpluses are created in the Company, for any reason or source, these shall be added to the consideration due to the suppliers of agricultural produce for their produce, as part of the consideration." From this pricing, the company derives the consideration to which the grower will be entitled for each product, in accordance with the sale price."
In other words, this is a statutory clause that defines a "goal" that is closer in essence to a non-profit institution than to a company that operates to maximize its profits (section 11 of the Companies Law; Section 1 of the Associations Law, 5740-1980). Therefore, the question arises whether a reasonable auditor can and should expect that the registration of the special payments as an asset is liable to create a presentation of financial stability in the eyes of the bond investors who invested in Agrexco - a company that "will not generate profits", or whether the investment decisions will be based mainly on the perception of the company as a kind of arm of the state, in a way that severs the alleged legal causal connection.
- This "unique" situation, in which a non-profit company operates, is described in the Barlev opinion (pp. 15-16):
"D... Indeed, in the company's bylaws, prior to its amendment in December 2010, it was determined that the company would not generate profits, and if surpluses were created in the company, for any reason or source, these would be added to the consideration due to the suppliers of agricultural produce for their produce, as part of the consideration. This determination, which was made in accordance with the policy outlined by the state, laid the foundations for the company's conduct and its decision-making system, which were not business-commercial at all.
It should be noted that in light of this policy, as part of the Company's obligations to bondholders, the Company has committed to a policy of recording an annual net profit of at least ILS 10 million, and that the Company's equity will not be less than ILS 40 million. As appears in retrospect, this undertaking was not honored, and on the other hand, the company continued with its original policy, as it had been established at the time of its founding.