The parties' arguments
- Epstein seeks to order "the appointment of an independent auditor," according to him, since CPA Diab, who handles the company's affairs, is tainted by a complete dependence on grace that deprives him of any possibility of independent judgment. According to Epstein, CPA Diab fulfills a number of positions that put him in a conflict of interest: the company's current accountant, the auditing accountant, an officer under Section 39 of the Companies Law, and an officer of Genta. This state of affairs, it is argued, makes CPA Diab the one who does Chen's bidding, and is contrary to section 160 of the Companies Law and the principle of independence enshrined in it, as well as section 10(a) of the Accountants Law, 5715-1955 (hereinafter: the Accountants Law) and the regulations enacted by virtue thereof. According to Epstein, Chen is taking advantage of his control over CPA Diab to conduct a one-sided and improper relationship with the court-appointed expert, in which "documents and data are selectively transferred to the expert behind the plaintiff's back and without any supervision." It was argued that the attempt to settle the matter at the meeting held on August 4, 2025 did not bear fruit. It was also claimed that there was a procedural flaw in the appointment of CPA Diab, because the appointment was made unilaterally by Chen only, CPA Diab was not appointed as an "auditing accountant" but as an "accountant for the company", CPA Diab's action was done in violation of section 165 of the Companies Law since the CPA fees were not approved at the economic meeting, and in any case the appointment expired because the law requires the appointment of an auditor CPA every year. According to Epstein, in this situation, which entails a violation of the Companies Law and exposes the company to risks, section 161 requires that an additional audit be performed by another auditor.
- Chen argued that the request should be rejected. According to him, CPA Diab was duly appointed with the consent of Epstein, who knew in advance that he was also an accountant for the company Ginetta, dealt with him and even agreed with him on his fees, and never complained about the state of affairs described by him. Chen argued that CPA Diab is the auditing accountant while the bookkeeping is performed by another entity, and that there is no legal impediment to the fact that an auditor audits one company will serve as an auditing accountant in another company controlled by the same shareholder. In any event, it was argued, there is nothing wrong with the fact that CPA Diab serves as an accountant for both the company and the company Genta. According to Chen, Epstein's claims are general and the fact that the CPA sent materials to the expert, after the latter contacted him, does not impair his competence. It was further argued that CPA Diab should not be considered an officer of the company within the meaning of section 1 of the Companies Law, but only for the purpose of submitting reports. Finally, it was argued that since the company is a private company and in light of the provisions of its articles of association, it is not obligated to hold an annual meeting every year, and that the parties acted informally until the outbreak of the dispute between them. Epstein's demand was born, it is claimed, after the financial statements showed that there was a balance owed to him.
Decision
- After reviewing the arguments of the parties, I am of the opinion that the application should be dismissed, subject to what is stated in the body of the decision.
- The appointment of CPA Diab was made at the company's general meeting on January 25, 2021 (see the minutes in Appendix 10 to the application), which was held in the presence of "all shareholders", as stated in the minutes. It should be noted that I accept Chen's argument that the minutes of the meeting erroneously stated the year 2020, because it is clear that on January 25, 2000, the date specified in the minutes, the company had not yet been established. Therefore, it is puzzling to Epstein's claim that the appointment of the accountant "was made unilaterally by [Chen] alone, before [Epstein] was a shareholder" (paragraph 17 of the application); As mentioned, Chen and Epstein founded the company and have been its shareholders since the day it was founded!
Moreover, the documents presented by Chen show that the appointment of CPA Diab was at the discretion of Epstein and that he was even in contact with him and cooperated with him (see the WhatsApp correspondence between Chen and Epstein, Appendices 3-5 to the response). The exchange of messages between Epstein and Chen in October 2021 reveals Chen's involvement in determining the CPA's salary, and even Chen's alleged awareness that the bookkeeping activities are not carried out by CPA Diab, but by one – Keren (in accordance with what Chen claimed). The concealment of this information from the court, together with the claim that the appointment of the accountant was made unilaterally by Chen, amounts to a lack of good faith and lack of cleanliness, which overshadows Epstein's request.
- Admittedly, the minutes of the general meeting recorded that it was decided to appoint CPA Diab as the company's "accountant" and it was not noted that his appointment was as an auditing accountant, but this does not lead to the conclusion that Epstein claims – that there was no appointment of an auditing accountant. It seems that we are dealing with poor grammar. According to Section 154(a) of the Companies Law, the obligation imposed on a company is to appoint "an auditing accountant who will audit its annual financial statements and give his opinion on them...", and not any other accountant. From this it is clear, especially with regard to the company we are dealing with, which is a company with a small scope of activity that was at the beginning of its journey, that the minutes were aimed at an auditing accountant and not at a "just" CPA. In addition, there is no dispute that CPA Diab actually served as the company's auditor, and it can be given the impression that Epstein knew this, when he wrote to Epstein, "I told him [CPA Diab] that he would make us a price. He doesn't do anything. Keren does everything" (Appendix 5 to Chen's answer). And if that were not enough, Epstein himself referred to CPA Diab as an auditing accountant (see, for example, the request for interim relief dated November 21, 2023, and in particular section 10, as well as the request dated December 6, 2023). Epstein's argument during the legal proceedings regarding the status of CPA Diab as an auditing accountant, creates a judicial estoppel that prevents him from arguing otherwise (Civil Case (Haifa) 29250-04-25 Abu Samaan v. Dakur, para. 26 and the references [Nevo] (June 9, 2025). The contradictory argument even affects his good faith and adds weight to the possibility of granting him relief.
- According to Epstein, in any case, the appointment of CPA Diab has long since expired, because the law requires the reappointment of an auditor at an annual meeting. In this argument, Epstein relies on sections 60 and 154(b) of the Companies Law.
Section 60(a) of the Companies Law states that a company shall hold an annual meeting every year and no later than fifteen months after the last annual meeting. Section 60(b) states that the agenda at the annual meeting will include a discussion of the financial statements as well as the appointment of an auditor. However, section 61(a) of the law states that "a private company may establish a provision in its articles of association, according to which it is not obligated to hold an annual meeting as stated in section 60, except to the extent necessary for the appointment of an auditor; If such a provision is determined, the company may not hold an annual meeting unless one of the shareholders or directors demands that the company hold it." Section 5.1 of the Company's Articles of Association states that "the Company will not be obligated to hold an annual meeting, except to the extent necessary for the appointment of an auditor...". It should be noted that in his application Epstein ignored the meaning of section 5.1 of the Regulations and did not even mention it at all (see sections 16-20 of the application, and in particular section 19). This conduct joins a series of omissions that were expressed in the fact that Epstein did not fully disclose the factual and legal picture.