(b) A transaction as stated in subsection (a) shall also not be valid against another person if that person knew about the personal interest of the officer or the controlling shareholder in approving the transaction, and knew or should have known about the lack of approval of the transaction as required by this chapter."
- According to Herbert Baruch's claim, he knew, or should have known, that the approval of the general meeting was not received for the purpose of Herbert's engagement in the bond, and hence that the lien transaction has no validity against Baruch in a manner that prevents him from realizing the lien. However, in my opinion, the relevant section for our matter is not section 280 above, but rather section 281 of the Companies Law, which states as follows:
"A company may cancel a transaction with another person, which requires approval as stated in this chapter, except for a transaction as stated in section 271, and it may also claim compensation from him for the damage caused to it even without the cancellation of the transaction, if that person knew about the personal interest of the officer of the company in approving the transaction or about the personal interest of the controlling shareholder in the public company or in the private company that is a bond company in the approval of the transaction, and knew or should have known about the lack of approval for the transaction as required by this chapter."
Let us clarify the matter – the Companies Law distinguishes between the "internal plane" between the company and the officer or controlling shareholder who is close to the company, and the "external plane" between the company and another person who is considered to be an external entity that is distant from the company (Goshen and Eckstein, at p. 357). Whereas on the level of internal relations, the company lacks legal capacity to enter into a transaction that did not comply with the procedural approval process, and therefore it is considered null and void as opposed to losses (Civil Appeal Authority 5296/13 Antorg v. Stevinsky, at para. 31 (Nevo, December 24, 2013)), on the external level of relations, the company has the legal capacity to enter into a transaction with the other person (Goshen and Eckstein, at pp. 357-358). Section 280 of the Companies Law, which deals with transactions that are invalid in the first place, therefore relates to transactions with an officer or a controlling shareholder thereof (in a public company or a private company that is a bond company). On the other hand, section 281 of the Companies Law, which deals with transactions that can be cancelled by the company, deals with transactions with another person.