"I'm the undersigned... I hereby confirm that the aforementioned decision was lawfully made in accordance with the Company's articles of incorporation and its objectives (updated today) at the meeting of the Company's management/meeting of the Company's Board of Directors that was duly convened.
I also confirm that the composition of the signatures specified in the aforementioned resolution is binding on the Company, and that all the decisions and approvals required by any law for the purpose of the aforementioned decision have been lawfully made, including in accordance with Chapter D1 of the Companies Ordinance [New Version], 5743-1983 / Chapter Five of Part Six ofthe Companies Law, 5759-1999."
In the framework of Engineering Deal, the decisions of the Board of Directors of Heftziba Engineering to provide guarantees to Mizrahi Bank to ensure the financial activity of Heftziba Housing and Heftziba Investments, were approved by Adv. Zach Pollak, who served as Heftziba Engineering's representative. This approval is identical to the version in which the transaction was approvedBTB Mizrahi by Attorney Hefziba Investments (with one difference: Adv. Pollak deleted the words in the line: "Including according to Chapter 41 To the Ordinance The Friendship [New Version], 5743-1983"). and within the framework of TransactionBTB Discount, Hefziba Investments signed the framework letter in which it undertook to pledge the financial deposit it received from Boaz Yona to guarantee the repayment of the loan that he himself took - And on this document it was confirmed by Hefziba Investments' attorney that the guarantee is given"By virtue of decisions made in accordance with any law of the authorized organs".
Thus, there is no dispute that Mordechai Yona was behind the back-to-back deals and the engineering deal - There is no reason to determine that the banks knew, or should have known, that the transactions did not receive the necessary approvals under the Companies Law, as he has the decision-making power both in the board of directors and at the general meeting of the guarantor companies. In this context, the banks were also entitled to rely on the approvals given to them by the guarantor companies' attorneys, that the transactions were duly authorized.
- Cancellation of the transactions due to non-compliance with the prerequisite of the "Company's Interest"
- The Special Administrator believes that he has the right to cancel the back-to-back transactions and the engineering transaction even since these transactions do not meet the pre-existing conditions In the section 270 Law The Friendship, which is that the transaction is For the benefit of the company. Before addressing the question of whether back-to-back transactions and engineering transactions meet this condition, consideration must be given to the standard of conduct derived from the requirement that interested party transactions be "for the benefit of the Company" (i.e., the standard that applies both to the officer engaged in the transaction and to the independent organ that is charged with approving it); Taking into account the nature of this standard, the scope of judicial review of such transactions will be determined. But before I turn to examine these matters, I will preface by saying that the Special Manager assumes that failure to meet the prerequisite condition of the "best interests of the company" establishes per se Grounds for cancellation against a third party by virtue of Section 281 Law - Even in circumstances in which the transaction was approved as required. However, this determination is not devoid of doubts, both in view of the language of the section and against the background of its purpose; However, I am not required to make any conclusions on the matter - For, as will be detailed below, in any case the Special Manager was unable to prove that the back-to-back transactions or an engineering transaction do not meet the condition that concerns the "good of the company".
Let us return to the standard of conduct and the scope of the judicial review required regarding the "good of society". Some believe that the condition according to which the transaction will be "for the benefit of the company" is similar to the requirement of "substantial fairness" used in American law - which is one of the aspects of the strict audit standard that is practiced there in connection with stakeholder transactions, and is known as "The Full Fairness Test" (entire fairness) (See, for example, Habib-Segal p. 575). In the fence Test It requires the defendants to prove the full fairness of the transaction, Both in terms of the manner in which it is approved (Procedural fairness), Both in the economic aspect-Business (Substantial Fairness) (See: Interest Elovitch, paragraph 76). However, it seems that today the tendency in Israeli law is to soften the strict standard of "full fairness", and accordingly to qualify the scope of judicial review when it comes to a transaction of interested parties that was approved by the company in accordance with the mechanism set out in the law. And I will explain.
- First of all, it should be said that the American "full fairness test" was born in Delaware case law against the background of the absence of a mechanism for approving transactions of interested parties that is prescribed by law, and this test is intended to legitimize In retrospect A transaction of interested parties and hence the aggravation on its side. IICompanies Law The Israeli legislature, on the other hand, established a procedural arrangement that constitutes a prerequisite for approving transactions of interested parties, which is intended to neutralize conflicts of interest in the transaction in advance - Therefore, the need to add a strict requirement regarding the full fairness of the transaction is significantly reduced (see the judge's remarks). Y. Amit, which have been said above from the need for the matter Elovitch, paragraphs 85-87).
Second, the basic concept on which it is based Companies Law is that a company is supposed to be managed by its organs, and that a court is not the appropriate institutional body to consider whether transactions are fair and beneficial to the company. The legal inquiry regarding the degree of economic feasibility of a transaction may be expensive and complex; to be biased by the fact that it was done retroactively and in view of the actual results of the transaction; and may even harm business certainty to the extent that it leads to the cancellation of transactions (see: Assaf Hamdani and Sharon Hans: "Full fairness? controlling shareholders, Duties of the Board of Directors and Judicial Review Law & Business T 75, 82-83 (2008), hereinafter: Greedy and Nice; Michal Agmon Gonen "The good (minority shareholders)?! The bad (controlling shareholders)?! and the court - The intervention of the courts in the transactions of interested parties who have passed the approval procedures in the company" Gross Book 47, 66 (2015); Lachovsky - חובת אמונים, at pp. 103-104).
- Against the background of these remarks, the judge expressed Y. Amit its position (albeit more than necessary), that as a rule, a court must refrain from examining on their merits transactions of interested parties that have been approved by law and in accordance with the mechanism set forth in theCompanies Law:
"The court's authority to examine the nature of the transaction if it is indeed in the best interest of the company - separately; his willingness to exercise his authority - separately; the scope of his intervention - separately; and the burden of proof placed on the person who claims this - separately. Not every time a claim is made that a transaction that met the conditions of approval required by law is contrary to the company's best interest, the court will be required to examine the insides of the transaction to the point of interfering with the judgment of the company's decision makers. On the contrary. In my opinion, the starting point is that the court should not intervene in transactions that have been approved according to the mechanism set forth in the law. I accept the approach that a transaction that has passed the approval mechanisms prescribed in the law (especially today following the amendment of the law and the tightening of the procedural requirements as described above), the preliminary and prima facie assumption in respect of it is that the harmful potential of the conflict of interest has been neutralized." (Interest Elovitch, paragraph 85).