E.1. Responsibilities of the Directors
E.1.1 The parties' arguments
- In the plaintiffs' appeal, it was clarified that it was directed at the decision of the trial court to exempt the directors from liability for damage caused to the company due to the flow of funds to the subsidiary (in the sum of approximately ILS 18 million) only, and not to the rest of the determinations relating to the additional damages that resulted from Pinkowitz's actions.
According to the plaintiffs, the trial court erred in determining that the entire board of directors was unable to fulfill its duties, and thus treated all the directors as a whole, without justification. Thus, for example, in the case of Horn, it was determined that he had been abroad in recent years, including on the dates relevant to the lawsuit, but Horn never filed a statement of claim on his behalf, and never claimed that he was unable to fulfill his role as a director. The plaintiffs argued that living abroad does not exempt a director from his responsibility to the company. Similarly, it was argued, Rebus never claimed incapacity, and as a rule, old age or lack of professional knowledge do not automatically indicate incapacity. Similar claims were made in relation to the other directors, who, according to the plaintiffs, did not claim incapacity (except for Sharon, who claimed incapacity as of 2000 only). It was argued that insofar as any of the directors considered himself unfit to perform the position because of his age or because of his residence abroad, he should have resigned in real time, and not retroactively relied on these circumstances as a justification for exemption from liability.
It was further argued that the trial court erred in ruling that the company was prevented from suing the directors due to the conduct of the shareholders. It was argued that the trial court ignored the principle that the company is a separate legal entity, and turned the company and its shareholders into a single entity. The plaintiffs argued that the shareholders were not a party to the proceeding that is the subject of the appeal, and that the failure attributed to them (in that they did not replace the directors for many years) should not be attributed to the company itself. In any event, it was argued, the determination that the shareholders failed to supervise the members of the board of directors does not diminish or soften the liability of the board members themselves.