“)a) A shareholder shall act in exercising his rights and fulfilling his duties to the Company and to the other shareholders in good faith and in an acceptable manner, and shall refrain from abusing his power in the Company, inter alia, by voting at the General Meeting and in the types of meetings, in the following matters:
(1) Changing the Articles of Association;
(2) Increasing the registered share capital;
(3) Merger;
(4) Approval of actions and transactions that require the approval of the General Assembly in accordance with the provisions of Sections 255 and 268 to 275;
(b) A shareholder shall refrain from discriminating against other shareholders.
(c) The laws applicable to breach of contract shall apply, with the necessary modifications, and to the breach of the provisions of subsection (b), the provisions of section 191 shall also apply, with the necessary modifications."
- We have elaborated on the history of the dispute between the parties and there is no need to repeat it. There is a basis for the claim that the conflict between the hawks clouds the company's activity and creates a chilling effect both with regard to the functioning of employees and officers, and with regard to the ability to recruit new employees and officers. Against the background of this state of affairs, it should be in the clear interest of the shareholders to remove these obstacles. The picture that emerges is that the sharp dispute between the parties is liable to deter employees and officers from fulfilling their duties, because the flames of the conflict do not skip them. In light of the existing conflict, an officer's position may be considered support for one of the parties to the conflict. This situation is likely to paralyze the company's operations and at least harm its functioning. An illustration of this risk can be found in the resignation of the CFO. For a period of time, it was not possible to recruit a CFO, but in the end, this position was filled with the assistance of the decisive director. However, the sharp confrontation between Gutman and Lahav and the threatening feeling felt by the professional led to her resignation [it should be emphasized in parentheses that Lahav agreed to indemnify the deputy director general who was appointed].
- Against the background of the prevailing situation in the company, the decisive director who is involved in the company's affairs supports the request that is intended to provide the company with tools to provide indemnity. However, despite his decisive voice on the board of directors, there is a difficulty. While the appointment of the decisive director caused the paralyzing equivalence of the board of directors to overcome, the paralysis at the general meeting remained. In my decision of September 18, 2023, which dealt with the approval of Gutman's salary, in which the aforementioned difficulty also arose, I addressed this situation and noted the following:
"We reiterate that the company's general meeting is equivalent in terms of the composition of the board of directors - Gutman and Lahav are shareholders in equal proportion and both are directors. In order to get the board out of its paralysis, I appointed the decisive director. Indeed, the board of directors made important decisions, first and foremost the approval of the financial statements and the submission of tax returns. In the context of Gutman's salary terms, due to the need for the dual approval of the board of directors and the general meeting, the situation that is likely to arise is almost certainly the inability to make a decision. This is because if the issue of Gutman's salary comes up for discussion at the general meeting, the impasse will return, which must be avoided. To be precise, the determination that the approval of the general meeting is necessary has one meaning - non-approval of the terms of the salary and harm to the company's functioning. When we overcame the paralyzing equanimity of the board of directors, we encountered it at the meeting. In the sense of "a man fled from the lion and the bear struck him." It is clear, therefore, that a solution must be found to this state of affairs, and the question is - what is the solution" (ibid., para. 31).
- Following the hearing at the compliance meeting on July 21, 2024, in which the decisive director instructed the company's attorney to prepare the materials regarding the indemnity, another board meeting was scheduled for September 5, 2024, to which Lahav and the attorney general did not appear, and therefore it was postponed to September 8, 2024. At this meeting, the issue of indemnification was discussed, and on the agenda were two options - granting indemnity to the CFO, or granting more general indemnity to officers to be decided by the Board of Directors (Appendix 7 to the application), a possibility that would take shape if the Articles of Association were amended. Since, in any event, an amendment to the bylaws was required, on September 12, 2024, the general meeting convened, and as expected, no decisions were made due to the disagreements and the impasse in which the meeting is located. It should be noted that while Gutman proposed a more general amendment to the bylaws, Lahav proposed an amendment that would allow indemnification for the CFO only.
- In fact, two outlines were on the agenda: a specific outline according to which the articles of association would be amended to allow indemnification to a specific entity (at that stage the CFO was mentioned), and on the other hand, a general outline according to which the articles of association would be amended in a way that would allow the board of directors to determine the parties to whom indemnification would be granted, as well as to determine its terms and limitations. Every outline and its virtues are with it, and every outline is liable to divert the focus of the decision. If a general amendment is made to the Articles of Association, the authority to decide to whom the exemption will be granted and the indemnity will be transferred to the Board of Directors, then Lahav will have no influence on the decision to whom the indemnification will be granted, but Lahav's ability will be preserved if the amendment of the Articles of Association is related to a specific entity (in which case it will not be possible to make a decision without the consent of the shareholders - Lahav and Gutman).
- If these were normal times, there would be room to prefer the general outline according to which the bylaws would be amended in order to allow the directorate to hold a discussion on the question of who is the cause to whom the exemption and indemnity will be granted, and not to change the bylaws bit by bit in relation to the specific officer. But the days are not normal, and the company is in a deep crisis and is facing a significant decision. In these circumstances, even though the court has the authority to do so, restraint should be exercised in extending a remedy that imposes a structural change in the company by means of a change in the bylaws (although I do not rule out taking such a remedy if necessary in the future). In these circumstances, a discussion of exemption and indemnification in relation to a specific party should not be disqualified in advance. As noted, there is apparently an agreement in principle to grant an exemption and indemnification to the CFO who will be recruited, but there may be a dispute regarding the granting of exemption and indemnification to other officials, and there will probably be a very sharp dispute over the indemnification of Gutman in his capacity as CEO. The disputes may be regarding the applicability of the exemption and indemnity, its scope and applicability to Lahav's claims as stated by Gutman. It should be noted that in this context, a certain proposal was raised by Gutman's counsel to qualify the exemption, in such a way that Lahav's claims against Gutman would not be harmed.
- From a review of the minutes in which the issue was discussed, it appears that the possibility of granting an exemption and specific indemnification has not been exhausted. In addition, the possibility of amending the articles of association in a gradual manner has not been exhausted, meaning that in the first stage, an amendment will be decided that will allow indemnification for the future (a proposal that was raised by the decisive director at the meeting on September 8, 2024, and Lahav expressed his agreement to it in the pleadings), and in the second stage, the exemption will be discussed retroactively. Therefore, it is appropriate that further discussion of the issues be held at the General Assembly.
- I therefore order that the General Assembly be convened within 21 days. Proposals for exemption and indemnification for defined officers will be brought before the meeting, and a separate vote will be held for each functionary, including the terms of exemption and indemnity. If the court's decision is required afterwards, an appropriate request will be submitted by the company's attorney in coordination with the decisive director, and then I will hold a hearing on the application, in which the exemption and indemnification in relation to each officer will be examined on its merits, and the shareholders' positions and conduct will be examined, among other things.
- Subject to the above, the application is denied.
The Result
- When I came to discuss the question of expenses, I considered the result in the three requests. As it appears from the decision, Keshet Lahav, which the company and Gutman opposed, was rejected, while Gutman's request, which the company supported and Lahav opposed, was accepted. I also gave my opinion on the outcome of the company's request regarding indemnification and the positions of the parties, and in the process I gave my opinion to Lahav's agreement to grant indemnification to the CFO. I also gave my consideration to the scope of the parties' arguments and their agreement to decide on the basis of the motions and answers and the completion of a written argument. These considerations lead me to the conclusion that Lahav should be obligated to pay expenses to Gutman.
- The result, therefore, is that I accept Gutman's request to remove Lahav from the company's board of directors, as stated in paragraph 38 of the resolution; rejects Lahav's request, as detailed in paragraph 49 of the decision; As for the company's request, action must be taken as stated in paragraph 62 of the decision.
- I oblige Lahav to pay Gutman expenses in the total amount of ILS 20,000.
The Secretariat will send the decision to the parties.