9.1 The seller must address in writing any shareholder holding 10% or more of the company's issued capital (hereinafter: the "offerers") in an offer to purchase the transferred rights (hereinafter: the "Offer of Sale"), and specify the proposed sale price and the other conditions relating to the sale of the transferred rights." [Section 9 of the company's articles of association, attached as Appendix E to Maor's affidavit of the main witness].
In this case, the right of first refusal was not exercised at all. In a letter dated August 14, 2022, the defendant stated to the plaintiff that such a transfer of shares requires the approval of the board of directors in accordance with the provisions of the Articles of Association; that there is a concern regarding the identity of the potential buyer; and that capital raising is expected to be carried out by way of a share allocation [Appendix 11 to Maor's main witness affidavit].
- It is not superfluous to note that the parties have a duty of good faith, both by virtue of the law and by virtue of the agreement [clause 5.1 of the agreement]. Conveying a disguised message that the transfer of shares to a third party will not be approved, especially when the refusal is made for improper motives, may be considered bad faith on the part of the defendant. This is because the role of the board of directors in this context is to protect the company, which requires it to act within the limits of its obligations as a manager and in good faith when making a decision to approve or not to approve the transfer of shares [for example, see: Civil Case (Haifa District) 24308-01-21 Samar Brothers Gas Station in Tax Appeal v. Fouad Samar, at paragraph 44 of the judgment of Vice President R. Sokol (Nevo, 2.1.2023); Civil Appeal 759/00 Estate of Nachman Goldstein z"l v. Pisgat Bartenura Ltd., 58(3) 711 (2004)].
- However, it is not necessarily wrong to refuse, or imply a refusal, of an offer to sell shares to a party that is "hostile" to the company. The court tends to intervene in such a refusal only when it is proven before it that the directors refused to approve the transfer in bad faith, or out of arbitrariness, whimsy or alien purpose [see: Civil Appeal 131/88 Israel Dan Rogovsky v. Edna Savir, 44(2) 622, 626 (1990) (hereinafter: the Rogovsky case)]. The burden of proof as to the existence of one of the grounds for intervention is on the person who claims it, and this is a heavy burden of proof [ibid., at para. 6 of the judgment of President M. Shamgar].
- In our case, I do not believe that the plaintiff bore the burden of showing that the defendant actually refused. The same applies to the question of whether the message he conveyed by implying that he might not approve the sale was made for improper motives and bad faith. The defendant insisted on his concern that this was an entity directly or indirectly connected to the controlling shareholders of defendant 2, against whom the company is conducting legal proceedings [letter dated August 14, 2022, Appendix 11 to Maor's affidavit of the main witness] - a concern that turned out to be true in Maor's cross-examination [see the minutes of the hearing of June 9, 2025, at pp. 17-18]. Moreover, the defendant does not object to the transfer of the plaintiff's shares to a third party, insofar as the party is not related to the controlling shareholders of defendant 2 [paragraph 62 of the amended statement of defense]. There is not necessarily wrong with such a refusal with respect to a particular third party, when the defendant has reason to believe that he will not be able to maintain a proper relationship with him [for example, see: Siman Tov case, at para. 14].
My conclusion is that the plaintiff did not meet the burden of proving that the defendant prevented her from selling her shares to a third party in bad faith and for improper motives, and that his conduct constituted discrimination against the minority in the circumstances of the case.