“Modern corporate law recognizes that stockholders have three fundamental, substantive rights: to vote, to sell, and to sue.” From these fundamental rights flow subsidiary rights, including the right to communicate with other stockholders, nominate directors, and communicate with (and even oppose) management and the Board. As this court has observed, “[o]ne of the basic rights of a stockholder is to be able to communicate with his fellow stockholders on matters germane to such stock, and, if necessary, to organize other stockholders for corporate action.” "
- In any event, as stated, I do not decide at this stage the reasonableness of the plan and for the purpose of this prima facie stage, I find that a prima facie examination of the language of section 63 and its purpose tip the scales towards accepting the applicants' position. However, the decision in this application is based, at this stage, mainly on considerations of the balance of convenience, as detailed below.
C.2.2. The Balance of Comfort and Irreversible Damage
- In examining the balance of convenience, I found that the applicants' position was preferred. I did not find that a joint application by two or more shareholders to convene a shareholders' meeting would cause irreparable damage to the company. This is further strengthened to the point where, even according to the company's approach, there is no specific concern of a hostile takeover by the applicants at this stage, and the prevention stems, according to her, from life experience or from a general concern relating to all the shareholders in view of the company's situation. In these circumstances, I have not found that a dialogue between the Applicants and other shareholders that will ultimately lead to an agreement regarding a joint application for the purpose of convening a meeting can form the basis for the position that this will cause irreparable damage to the company.
- On the other hand, a significant dilution, as will occur if the defense plan is implemented in light of such an application, is irreparable damage to the applicants.
- I did not find it acceptable to accept the company's position that no damage would be caused to the applicants if they acted in accordance with the provisions of the protection plan, and that at most they would suffer compensable financial damage. First, the question under discussion is whether an action under section 63 of the Companies Law, as it is written, will cause irreparable damage. There is no dispute, even according to the company's approach, that the answer to this is yes. The fact that it is possible to act in other ways for the purpose of convening the meeting does not change the fact that if the Applicants apply to the company together with others in accordance with the language of section 63 of the Companies Law, their holdings will be diluted. Second, as stated, the damage to the company is even less than that of the applicants, since, as I noted above, at this stage, the company has not indicated concrete and irreversible damage that is expected to be caused to it as a result of the joint application to convene the shareholders' meeting. At this stage, the concern raised by the company remains theoretical and vague, and does not relate specifically to the applicants. I will add that it is not at all clear whether the difficulty involved in the public solicitation process is purely of a monetary nature (see in this regard: the Williams case, paragraph 38):
"Mills explained that stockholders frequently “take the temperature” of other stockholders in advance of launching a proxy contest in light of the risk of financial and reputational damage resulting from a failed contest."
- In any event, as stated, in the absence of an uncertain irreversible risk or damage to the company, I found that in examining the balance of convenience, the applicants' position should be preferred. Since the balance of convenience is the most significant of the two considerations that need to be addressed, it can tip the scales in favor of accepting the request.
C.3.2. Additional Considerations
- I considered the company's position that, since the protection plan had already come into effect, the acceptance of the application constitutes in fact the granting of an injunction and not an injunction. According to her, in view of the precedent according to which an injunction will be granted sparingly, this is sufficient to justify the rejection of the application. In this context, I also examined the argument that the Applicants' position, according to which they have no objection in principle to the application of the Protection Plan, is inconsistent with their application, which erodes the validity of the plan or seeks to apply it only partially. After considering the matter, I did not find it acceptable to accept the company's arguments in this matter, inter alia, because I do not believe that they have any real practical implications in the framework of this application.
- First, until the application of the protection plan, there was no impediment to two or more shareholders approaching the company for a request to convene a meeting, even though the fact that the company's cash pool was higher than its traded value had been known for a long time (see Civil Case (Center) 57198-03-23 Murchinson Ltd., Canadian v. Nano Dimension Ltd., paragraph 3 of the [Nevo] judgment (November 1, 2024)). The only change in the state of affairs is the entry into force of the protection plan, but the company did not attest to a factual change or a real risk that led to the need to apply the protection plan at this time. Therefore, a determination that the protection plan will continue to be in effect but that the temporary relief will prevent the applicants from diluting when applying together with other shareholders for the purpose of convening a meeting, meets the definition of an injunction (prevention of dilution) that is intended to leave the status quo as it has been until now.
- Second, in the framework of the statement of claim and the request for temporary relief, the Applicants claimed that they had no objection to the application of the protection plan, along with their petition that it be determined that the plan would not infringe their rights in accordance with section 63 of the Companies Law. Therefore, it is clear that their position was not that there was no impediment to applying the defense plan even with regard to convening a meeting. On the contrary, their clear position was that they did not argue against the application of the protection plan subject to the preservation of their right, as they claim it, in accordance with section 63 of the Companies Law.
- The company further argued that the temporary relief in the application is also the final relief. I did not find that there is any truth to this claim. The matter of the temporary relief is the request of the Applicants to now contact the Company and request the convening of a meeting, without this right being deprived of them until the date of the decision in the main claim. The granting of interim relief certainly does not make the discussion of the final relief redundant, since the final relief relates to the right of the applicants to apply and request the holding of special meetings together with other shareholders from the date of the judgment onwards and as long as the protection plan is in effect.
- The company also argued that this is a theoretical remedy, since the applicants have not yet approached the company with a request to convene a meeting. This argument is not at all clear, since the company clarified that if the applicants had approached the company, the share of their holdings would have been diluted. In order not to endanger a significant part of their holdings, the Applicants applied here before contacting the Company for a meeting. It appears that the application was also necessary for the reason that the company was required to clarify to the court, on two different occasions, what is the exact factual basis that would lead to dilution according to the defense plan. It therefore emerges that the Applicants acted with the necessary caution when they approached the Court prior to contacting the Company in order to obtain the requested relief that would prevent the dilution.
- According to the company, the board of directors has the protection of the business judgment rule, and therefore it is not possible at all, and certainly not in the framework of a temporary relief, to replace its discretion. It is doubtful in my opinion, and this is said only prima facie in view of this preliminary stage of the discussion, that the question before me must be examined in accordance with the rule of business judgment. The first layer of the discussion is legal and the decision on the application here, as stated, is rooted, mainly, in the balance of convenience. Even on the merits of the argument, it is doubtful whether it is possible to use the defense of the business judgment rule for the purpose of examining the reasonableness and proportionality of the poison pill. See: Williams in paragraph 21, where it was held that a poison pill program is not examined according to the lenient rule of business judgment, but rather in accordance with the two stages set out in the Unocal case (attached as Appendix 2 to the Company's response to the request for temporary relief). The aforesaid statements are made without setting rivets, and the argument, of course, is reserved for the company and will be discussed in the framework of the main proceeding.
- As to the claim regarding the applicants' good faith in view of the manner in which Mr. Sarfaty's affidavit was submitted; There is truth in the company's position that it would have been better if the Applicants had drawn attention to the fact that Mr. Sarfati signed in front of a foreign lawyer and that another signature of his would have been submitted later. I have not found that this conduct amounts to a lack of good faith, which alone is sufficient to reject the application. Certainly, a place where Mr. Sarfati appeared (in a visual conference) for interrogation of his affidavit and a place where proper versions of his affidavit were subsequently submitted.
- Conclusion
- In light of all of the above, I grant the request in the sense that the Applicants will be able to apply to the Company together with other shareholders with a request to convene a special shareholders' meeting in accordance with the provision of Section 63 of the Companies Law and the Relief Regulations. Such an application will not lead to the activation of the protection plan and will not lead to the dilution of the holdings of the applicants or the other shareholders who apply together with them.
- Needless to say, this decision relates to an application to the company in accordance with section 63 of the Companies Law only. Insofar as there are other agreements between the Applicants and the shareholders, which are not an agreement to apply for the purpose of convening the special meeting, this decision does not apply to these agreements.
- The Applicants performed a guarantee to secure the company's damages in the total sum of ILS 250,000. The entry into force of this order is conditional on the issuance of the guarantee, which will be executed within 14 days from today.
- The Respondent will bear the Applicants' expenses in the sum of ILS 7,500 plus VAT in accordance with the law.
Granted today, 9 Iyar 5786, April 26, 2026, in the absence of the parties.