Liquidations (Center) 39133-02-26 Zadok Tsuki Abusco v. Official Receiver Tel Aviv

Judgment

The Applicant's request that the court order the liquidation of Z.G.S.  Air Conditioning Engineering Ltd.  (hereinafter: the "Company").

The shares of the company, which was established about twenty-three years ago, are held by the applicant and his brother-respondent 2 (hereinafter: "the objector").  The applicant and the objector are also the registered directors of the company.

1. According to the Applicant, the objector has been acting for a long time in contravention of the provisions of the law, contrary to the interest of the company and contrary to the interest of the Applicant. In this regard, it was argued by the Applicant, inter alia, that the objector dismisses employees, does not allow reasonable activity of the company, expresses himself improperly vis-à-vis employees and third parties, acts for the Company to engage with a third party in a partnership agreement while concealing the relevant data and details from the Applicant.  Additional arguments were raised regarding the manner in which the objector conducts himself with regard to signatures on behalf of the Company, both vis-à-vis the banks and third parties.

The Applicant further claimed that he is currently financing the Company's activities, and all this in the face of the Objector's poor conduct.

According to the Applicant, this conduct of the objector is in order to thwart the possibility of the proper management of the company, and at this stage there is nothing left but to order its liquidation.

2. The objector filed his objection to the application for liquidation of the company and argued that there was no substance to the factual claims raised by the applicant against him, and all this where he acted in the past and is still acting today for the benefit of the company. The objector further argued that it was precisely the applicant who established an activity that competed with the company's activity and was contrary to its interest.  According to the objector, in this case the conditions specified in the provisions of the law for the purpose of granting an order for the liquidation of the company are not met.
3. The Official Receiver announced that given all the data as presented by the Applicant, he did not see fit, at this stage, to take a position and even petitioned to allow him not to participate in the hearing.
4. In order to complete the factual picture, I will note that at the same time as the opening of this proceeding, the Applicant also filed a request for temporary relief, which was rejected for the reasons stated in the decision. Subsequently, additional requests were subsequently filed, whether for the granting of this or that relief or for the completion of the disclosure of the information.
5. In this case, two hearings were held in the framework of which attempts were made to bring the parties to an agreement that would eliminate the need to decide the proceeding on its merits, and more than that, would benefit the shareholders and the company. In those hearings, decisions were given, inter alia, that enabled the delivery of information to the applicant.
6. In addition, the Applicant was asked to clarify whether he insists on his request to liquidate the company or whether it would be correct that the disputes between the parties be examined within the framework of a different legal path.
7. On July 19,2026, a notice was submitted by the Applicant stating that he wishes to continue on the legal path that he had initiated, i.e., in the framework of the application for liquidation of the company, when, according to him, all the conditions specified in the provisions of the law for this purpose are met. The Applicant further claimed that a warning letter has also been received from any of the company's employees regarding the intention to apply for liquidation of the company where the funds due to them in accordance with the provisions of the law will not be paid to those employees.
8. The Ottoman Settlement [Old Version] 1916 Given the substance of the claims, and especially when we are dealing with workers' rights, the objector, who once again argued, was asked to address the lack of justification for conducting the liquidation proceeding. In the case of the workers, the objector argued that there is a material gap between the claims and the actual duties, as well as that he is in negotiations with the workers' attorney for the purpose of reaching an arrangement (when in the case of one of the workers such an arrangement was even reached).

12-34-56-78 Chekhov v.  State of Israel, P.D.  51 (2)

9. In order to complete the factual picture, I will note that during the recess of the courts, an additional request for temporary relief was filed by the Applicant, and this was set for a hearing.
10. Given all this, I have no choice but to go through the process of his body.

Discussion

11. In accordance with the provisions of Section 342F of the Companies Law, 5719-1999, the liquidation of a company by the court may take place where the company itself has made a decision to do so, in the event that the company has not commenced business activity for a year or ceased its activity for a year, or where the court finds that it is right and honest to do so.
12. In our case, the relevant alternative is the latter, i.e., dissolution from justice and equity. This is a basket clause, which grants the court very broad discretion.
13. In the framework of this discretion, consideration is given to a very wide range of data, including the question of the company's continued activity, whether that activity corresponds to the objectives for which the company was established, whether the company's management is carried out in accordance with the provisions of the law, the question of the execution of fraudulent acts, the existence of an infrastructure for managing the company's business activity, the question of the existence of a deadlock in the relationship between the shareholders, the corporate structure and whether it is a company that is a kind of partnership, the scope of the involvement that the court will be required to manage the corporation and its reasonableness, the question of the existence of creditors or employees who are likely to be harmed by the liquidation, and the implications of the company's continued management on the proprietary rights of any of the shareholders.

This is not a closed list of issues or considerations, and in every proceeding the court must consider all the individual data.

14. However, and as a second thread, it emerges from the various judgments handed down, inter alia by the Honorable Supreme Court, that the first substantive and fundamental issue that the court is required to consider when examining a request for liquidation for reasons of justice and honesty, is the question of the existence of the corporation's economic activity, due to the starting point that a going concern should not be "killed" only because of an internal dispute that exists between the shareholders, to the extent that there are measures that are less drastic than liquidation.
15. 00Quoted from Nevo where the company is an active company, the court must exercise extreme caution and refrain, as much as possible, from liquidation, which is an extreme remedy, the ripples of which to a great extent deviate from the relationship between the shareholders themselves and also have implications for the value of the company at the time of liquidation, on the company's engagements with third parties (if there are any), on third parties such as: employees, suppliers, customers, etc.

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16. It appears that the justification for ordering the liquidation of the company will be found only where it turns out that the company is no longer active or has reached an impasse that is likely to continue in the future, and when there is no alternative remedy that can prevent the alleged discrimination or to bring about the settlement of the dispute between the shareholders of the company (in this regard, the parties will be referred, inter alia, to the Civil Appeals Authority 5596/00 Stavi v. Nachusi, IsrSC 55(1) 149 (2002); Liquidations 32686-01-11 Form v. Ashdash Business Management Ltd.  [Nevo] (April 3,2011), Opening Motion (Tel Aviv) 35304-09-13 Uzi Ben Haim v.  Shalom ZeidLer [Nevo] (March 16,2016); Bankruptcy (Tel Aviv District) 1049/08 Ben Zion Amarant v.  Prospec Tani Technogin Ltd.  [Nevo] (March 27,2008)

While I have considered all the arguments of the parties, and without this decision expressing a position on the merits of the Applicant's claims against the objector, I find that the liquidation application should be rejected, for the reasons detailed below;

17. The liquidation application on its merits did not indicate that the company is inactive or that it is not solvent as of today, despite the question marks raised by the applicant in his application. The Trustee also saw fit, only in view of this fact, not to intervene in the dispute and even to petition for his release from the hearing.

I am aware of the prima facie factual picture that can be learned from the arguments of both parties, in which it was possible to get the impression (including from the opponent's attitude in the texts and in the discussion) that there has been a reduction in the company's activity, employees have terminated their employment in the company, and apparently only one employee remains (beyond the shareholders).