Accordingly, it was ruled that the basic conditions for the existence of a partnership are the existence of a business, two people managing it together, and a common motive for generating profits. In addition, in the Schwartz case, various indications were included that may assist in determining whether one relationship or another in practice constitutes a partnership in the legal sense, including, for example, the intention of the parties to become partners and the presentation of the parties to the public as partners (the Schwartz case, at p. 854; Civil Appeal 682/87 The Israeli Phoenix v. Ackerman, IsrSC 34(2) 82 (1989)).
- These indications are not a closed list and the weight of the various parameters will be determined by the court in accordance with the context and circumstances of the matter (see, for example, T.A. (Tel Aviv District) 1083/06 Zidkiyahu Hermolin v. Adv. Shraga P. Biran (17 September 2009), para. 21). Thus, over the years, additional indications have been added in case law, including the parties' participation in the assets and possession of the business; the equal right of the parties to conduct the business; the mutual right to obligate each other in the business; the initial investment imposed on each of the parties; and the fact that the introduction of a partner or employee into the business requires the consent of the parties to the partnership (Civil Appeal 167/89 Tanami v. Zadok (April 7, 1992), para. 11; hereinafter - the Tanami case) as well as participation in the losses and profits of the business (Civil Case (Tel Aviv District) 44549-11-15 Information Gates in the Tax Appeal v. John Bryce Training Ltd., para. 50 (August 7, 2018) and the references therein; hereinafter - the Bryce case).
The burden of proving the existence of a partnership relationship is on the party claiming its existence (Civil Appeal 1763/93 Zilkha v. Shochat (March 14, 1996); The Levy case, paragraph 8; Opening Motion (District Judge) 23796-05-12 Bronner v. Brunner (July 2, 2019), para. 66); Civil Case (Tel Aviv District) 11419-04-16 Mofid v. Tzachor Engineering and Construction in Tax Appeal (November 13, 2019)). This is all the more so in those cases in which it is not explicitly stated that this is a partnership relationship, whether in light of the non-registration of a partnership, or in light of the existence of a contradictory corporate structure.
- To summarize this point, the rule is that a form of incorporation that is not a partnership will negate the existence of a legal partnership between the parties. However, in exceptional cases, such as when there are family members and there is a restriction on the transfer of ownership of shares, it will be possible to recognize the existence of a partnership relationship between shareholders in the company, where the burden is on the person claiming the existence of a partnership.
IV. There is no connection between the claim of partnership and the illegal activity of the plaintiff and defendant 1
- The plaintiff emphasized in his affidavit and even repeated several times in his testimony the basic assumption on which he relied, according to which the structure of the chain of companies from 2005 was intended to circumvent the regulation, but it was only for appearances and did not change the substantive relationship that underlies his economic relationship with the defendant, as it had been before. The plaintiff relied on the determinations in the amended indictment, which, according to him, presents him and defendant 1 as partners and that in the plea bargain "we both admitted that we were full partners and bore full responsibility" (paragraph 76 of his affidavit).
- The amended indictment did determine, as stated, that all the activity of the manpower corporations after 2005, including the division of labor and management between them, was a misrepresentation and was intended to circumvent statutory arrangements:
"62. The Uden Company was owned by a foreign company during the relevant period, but in practice it was (and still is) controlled and managed by Defendants 1 and 2...
- The three manpower corporations received a permit to employ up to 2,100 foreign workers in Israel (700 foreign workers per manpower corporation). In contrast to the permit given to manpower corporations, the core work of the manpower corporations was done by Oden, who located the foreign workers, transferred them to Israel, and managed the corporations in practice...
- In order to transfer funds from the manpower corporations to Uden under their control, defendants 1 and 2 created a series of agreements with the manpower corporations, according to which Uden provided ground services and logistical services to foreign workers arriving in Israel, including transportation, quarries at work, housing and salary.....
- Defendants 1-7 presented to the factories a false representation that they were ostensibly complying with the laws and procedures, despite the fact that defendants 1 and 2 controlled and managed the manpower corporations and the officers of the manpower corporations, took over the powers of the manpower corporations and treated the property of the corporations as their own.... Thus, defendants 1-7 and defendant 9 received and left the permits fraudulently in their hands over the years.
This control is expressed, among other things, in the following ways:
- Auden controlled and managed the entire accounting system of the personnel corporations and Schneider...
- Defendants 1 and 2 behaved in the manpower corporations in the manner of owners. They transferred and approved the transfer of funds worth tens of millions of shekels from and to the manpower corporations, directed and approved the actions of the directors of the manpower corporations, managed the relationship with the legal and accounting advisors of the corporations, took care of locating and bringing in the foreign workers from China, and were involved in the appointment of the Israeli employees of the corporations, including their CEOs..."
- For these acts, the plaintiff and defendant 1 were held criminally responsible. These findings are not in dispute. Therefore, from a commercial-economic point of view, the corporate structure that is split into several manpower corporations should be ignored and the ownership of the plaintiff and defendant 1 in them should be concealed, since this was only for appearances.
The plaintiff is of the opinion that this is a "trick" in the words of the Supreme Court in the Ben Ephraim case, and therefore, in his opinion, this is sufficient to lead to the conclusion that this is a partnership.