This is also true for our case. It is not possible to accept Gutwein's statement, according to which he made do with reports from Pinkowitz regarding the company's situation, in a way that fulfills his procedural duty of care towards the company. As stated, part of the skill requirement includes the requirement to devote appropriate time to the company's affairs, and the case law clarified that the time dedication cannot be carried out without active attendance at the meetings of the board of directors. Furthermore, Gutwein's presence in Switzerland was dedicated, among other things, to running "Hope Switzerland" for a short period. The fact that Gutwein was fit to manage the institution established in Switzerland indicates that he was at least also qualified to notify the company of a change in his personal circumstances as required by section 227A of the Companies Law, and that he cannot be attributed "incapacity" or "incompetence" that prevented him from giving such notice.
- Similarly, I have not found that the advanced age of the directors in itself indicates incompetence or automatic "incapacity". As is well known, a decline in these and other skills that sometimes accompanies aging processes is a subjective matter. It is not possible to determine in a comprehensive way that every person who has attained heroism is not fit to serve as an officer of a corporation without committing the sin of ageism. The directors did not prove that their advanced age led to a decline in one or another of their skills, did not detail how their advanced age prevented them from fulfilling their duties as directors, and did not provide evidence of this. Admittedly, it was argued that, as a rule, the directors were older and even the court emphasized this argument and seemed to attribute significance to it, but I am of the opinion that granting a sweeping exemption from tort liability to officers of a corporation that derives solely from their advanced age is improper and undesirable. Therefore, I have not found that Gutwein and Horn's overseas stay or the advanced age of the other directors leads to the conclusion that they were "incapacitated" from performing their duties in circumstances in which they were also unable to notify of the change in the conditions of their eligibility to serve as directors of the company.
- An exception, in this context, is Sharon, in respect of whom the trial court ruled, referring to the Bilu Report, that he attended the meetings only until 2000, after which he was absent due to illness and impairment of his functioning. It should also be noted that in the summaries submitted on behalf of Sharon's estate, it was claimed that after he fell ill in October 2000, he retired from all his positions in the village. The other directors did not claim that they had notified the company of a change in their circumstances or of their resignation from their positions, and this, as stated, without justification and in breach of their duties to the company. Therefore, it appears that with the exception of Sharon, who for at least part of the period (beginning in October 2000) announced his retirement from his positions and his lack of qualifications, the other directors did not fulfill the requirement of skill and the conditions of competence, and breached their duty to notify the company at the relevant time.
Notification Requirement - The Obligation to Receive Information
- As stated, section 253 of the Companies Law provides that a director must take "reasonable measures to obtain information relating to the business feasibility of an action brought for his approval... and to receive any other information that is important in the matter of such actions." The trial court's determination that the board of directors did not function at all during the period relevant to the lawsuit ostensibly makes the discussion of the question of whether the directors had sufficient information to approve the transfer of funds from the company to the subsidiary. It is clear that the determinations that the board of directors was unfit to perform its duties lead to the conclusion that the directors did not receive and certainly did not require all the relevant information for the purpose of approving the actions.
- However, the trial court did not suffice with holding that the board of directors did not function in practice, but further ruled that the claim should also be dismissed on its merits, since the directors were not negligent in supervising Pinkowitz's actions. Among other things, the trial court found "no reason to suspect that Pinkowitz's conduct was improper" and ruled that the directors' reliance on external consultants and experts who did not warn them of risks in the transactions or the company's situation exempted them from liability: "The evidence clearly showed that the company had at its disposal a legal advisor, an accountant and other consultants, and as long as they did not warn the directors about the company's situation, why should the directors have contacted and sought answers to questions that were not Did they wake up?" (Paragraph 180 of the trial judgment. Emphasis added, z.z.). In view of these determinations, which to some extent contradict the main ruling of the trial court regarding the "incapacity of the board of directors", I will also briefly address the nature of the duty to receive information, and the question of whether the directors did indeed fulfill this duty properly.
- The wording of section 253 of the Companies Law and court rulings indicate that the demand to receive full information must indeed be realistic and reasonable in accordance with the circumstances of the case, but the information must be material and directly relate to the business feasibility of the action that requires approval; that the board of directors must examine alternatives to the proposed action; and that the collection of information must be done rationally (on these criteria as the basis for the obligation to collect information in foreign legal systems but also in Israeli law - see Licht, pp. 497-510, 518-524, and references therein). In any event, it is clear that before making a decision or approving an action, and even before requesting the relevant information, the directors must be aware of the nature of the decision or action in question:
"A director and a functionary in the company must make an informed decision, the result of 'a process of gathering perusal, discussing, and examining relevant data, documents and considerations.' There is no dispute about this, but a prerequisite for a conscious decision to approve a transaction is that it is informed, i.e., the director's knowledge of the relevant transaction is required" (Civil Appeal Authority 4024/14 Africa Israel Investments in Tax Appeal v. Cohen, at para. 41 (April 26, 2015)).