On the level of essence - Stakeholder transactions are subject to fiduciary and prudential duties imposed on officers, and to the duties of good faith and fairness imposed on controlling shareholders. In his case, it was claimed that Mordechai Yona and Boaz Yona had a personal interest in the transactions, in a manner that amounts to a conflict of interest that constitutes a breach of trust on the part of the company's officers, in contravention of the Section 254 Law The Friendship:
- A) An officer owes a duty of loyalty to the company, He will act in good faith and act in its best interest, This includes -
(1) Shall refrain from any action that has a conflict of interest between the performance of his position in the company and the fulfillment of another position of his or her personal interests;
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On the procedural level - The legislature established a decision-making mechanism in the company, designed to ensure that a stakeholder transaction is approved by an independent body that is not affected by the conflict of interest. According to Section 270(1), "A transaction of a company with an officer of it and a transaction of a company with Another person who is an officer of the company has a personal interest in it" They are transactions. E"Permits are required as provided in this chapter, Provided that the transaction is for the benefit of the company". Definition of "Personal interest" Found In the section 1 Law The Friendship, and at the relevant time it was formulated as follows:
"Personal interest" - a person's personal interest in an action or transaction of a company, including a personal interest of his relative and of another corporation in which he or his relative has an interest, and with the exception of a personal interest deriving from the very holding of shares in the company.
More From Section 270(1) of the law, that a precondition for the approval of an interested party transaction is "that the transaction is for the benefit of the company" - This means that it is not possible to legalize a transaction that is inconsistent with the best interests of the company, even if it has been given lawful approvals (Civil Appeal 7735/14 Vardnikov v. Elovitch, [Published in Nevo] Paragraph 85 (December 28, 2016), as follows: The Elovitch Matter; Civil Appeal 2773/04 Natsba Settlement Company in Appeal Taxes v. Atar, [Posted inNevo] Paragraph 18 of the judge's judgment (as described at the time) M. Naor (14.12.2006)).
- Sections 271 and272 The law enumerates the necessary approvals for the execution of a transaction with an officer, or with "Another person who is an officer of the company has a personal interest in it"; And in this context, importance was given to the question of whether we are dealing with"An unusual transaction"If not, and whether the company has an audit committee or not:
- Deal In which the provisions of section 270(1), which is not an exceptional transaction, require the approval of the Board of Directors, unless otherwise determined by way of approval in the Articles of Association.
- (a) Deal of A company in which the provisions of section 270(1) are fulfilled and are an exceptional transaction, or a transaction of a private company that is not a bond company in which the provisions of section 270(2) are met, requires the approval of the audit committee and then the approval of the board of directors.
(b) Anonymous Was For a private company that is not a bond company, the transaction requires the approval of the board of directors only if the officer is not a director, and if the subject of the The position is a director also approved by theGeneral Meeting.