Civil Case (Tel Aviv) 9884-06-23 Tal Ohev Zion vs. Ronen Ohev Zion - part 6

When will the court order a forced purchase - the rule

112. As stated, section 191 of the Law anchors the court's broad authority to order remedies for the removal of discrimination. Once discrimination has been proven, one of the remedies explicitly mentioned in section 191 of the Companies Law is a forced purchase.  As part of the implementation of this remedy, the court is authorized by virtue of section 191(a) of the Companies Law to order the purchase of the shares of a shareholder according to their value, whether by another shareholder or by the company itself.  This remedy is part of the spectrum of remedies "that bring the array of relations between the shareholders to an end" (Eran Spindel and Yael Spindle Shareholders' Struggle: The Cause of Discrimination in a Private and Public Company, p. 323 (2017) (hereinafter: Spindel and Right).
113. The importance of this remedy was discussed by the Supreme Court in Other Municipality Applications 5804/19 B. Real Estate Management Ltd. v. Tinhav Construction and Development Company (1990) Ltd., published in Nevo, October 3,2021, in paragraph 46 (hereinafter: the Tinhav case): "The remedy of forced sale has been recognized in case law as the main remedy for removing deprivation and loss of trust, in view of its advantages as a simple mechanism and as a remedy that allows determining which of the parties will be the controlling shareholder after the forced purchase.  (...) It was also noted that this remedy is the "king's way" in classic situations of minority discrimination, where the court is convinced that the way to remove the discrimination is by separating the hawks."
114. In the case of private companies, the court will make greater use of its power to order the purchase of the shares of a shareholder (Spindl and Zakut, at p. 350), in order to prevent a situation in which the shareholder is in a "trap": "This power of the court is applied even more strongly in the case of private companies, whose shares do not enjoy high tradability: the minority shareholder may find himself 'trapped' in the company, inability to realize his property, when he finds himself in a situation of oppression or deprivation" (Civil Case (Tel Aviv-Jaffa District) 1720/04 Etting Yonatan v. Spector Avner, published in Nevo, given on May 6,2008, at paragraph 33).
115. The unique characteristics of this remedy, with its advantages and disadvantages, were discussed by the Supreme Court in the Adler case, in section 85: "The advantage of this remedy is twofold: first, it is a mechanism that is simple to implement, and second, the remedy allows for determining in advance which of the parties will be the controlling shareholder after the separation of powers. It should be noted that in cases where this remedy is implemented as a remedy for removing deprivation, it will usually be the disadvantaged party that will be obligated to buy the shares of the disadvantaged party, but there may be cases in which it will be appropriate to obligate the disadvantaged party to purchase the shares of the disadvantaged party (...).  Alongside the advantages of the remedy is also its main disadvantage - the need to obtain an objective valuation, which may be expensive and reflect a value that deviates to one degree or another from the value that the parties themselves attribute to the company."
116. At the same time, while a forced acquisition is the "king's way" in a classic situation of minority discrimination, its granting is not automatic. The case law held that proportionate use should be made of the remedy of compulsion to purchase shares, since this remedy is liable to infringe on the property rights of the shareholders and interfere in the internal affairs of the company (see Spindel and Right, pp.  351-352).  In view of these limitations and the potential harm to the shareholder's property, care must be taken to distinguish between discrimination and mere dispute.  Thus, it was held that a loss of trust between the parties or a strained relationship, in and of itself, does not constitute sufficient grounds to justify the coercion of purchase (see Civil Case (Economic) 11439-05-19 Lilach Tal v. Orly Guy, paragraph 139 of the judgment of Justice Sharvit, published in Nevo, January 21,2024, hereinafter: the Tal case).  However, it stated: "Once the existence of ongoing deprivation has been proven, which in itself justifies the granting of a remedy of forced purchase, the murky relationship between the parties strengthens the justification for granting this remedy."
117. The question of the weight of the loss of trust as a justification for the separation of powers acquires unique significance when the company is not an ordinary private company, but rather operates as a "kind of partnership". In companies of this type, when the relationship between the parties reaches a snail, the shareholders are liable to feel a "dead end".  Against this background, case law has given section 191 of the Companies Law an interpretation of "open tissue" which does not enumerate a closed list of remedies.  The Supreme Court explicitly ruled that in the case of a "quasi-partnership" company, it is possible to make use of the broad and flexible authority of the section in order to adapt a just solution even to situations of loss of confidence or a "dead end", which in themselves justify the separation of powers in the company, without proof of discrimination at all (see the Magnesi case, paragraph 15).
118. When the court comes to "separate forces" in a company that is a quasi-partnership, it is faced with a number of alternatives. The case law held that in cases of a mere loss of trust (without discrimination), the "king's way" would be to conduct internal bidding between the shareholders (such as the envelope method, ibid., paragraph 17).  However, in the Magnesi case, it was clarified that the bidding remedy is "not without defects", and it was held that bidding is an inappropriate tool when there are significant power gaps between the parties (ibid., paragraph 17).  In these cases, there is a real concern that the financially strong party will be able to make an offer that will give it an unfair advantage, and will push the weaker party (see also the Adler case, para.  87).
119. Therefore, where there are significant power disparities between the parties, or where one of the parties has a close and special connection to the company and its activities, the court must abandon the method of bidding and adopt the forced purchase remedy, according to an external and objective valuation. This is in order to ensure that the relationship is severed in a fair manner, "while manually tailoring each case according to its circumstances" (Magenzi case, paragraph 15).

From the general to the individual

120. In our case, I have reached the conclusion that with regard to the period prior to the death of the late Eli, Yoram and Ronen had equal rights to him, and the relationship between the brothers rested, alongside the formal corporate structure, on a relationship of trust and partnership. See Ronen's testimony on this matter, at p. 54, paras.  22-27: "From the age of 17 until the day of his death - I worked with him hand in hand together, with great love, full trust...  Eli was the eldest, when I would talk to him - I would talk to him with my head down, that's how we were raised, after my father it was Eli, Eli and Eli and Eli."
121. The problem is that the situation changed after the death of the late Eli. While the plaintiffs, his heirs, did not seek to step into his shoes with regard to the management of the companies, the defendants took Eli's place in the management of the companies (see the statement of defense, paragraph 15; Tal's affidavit, paragraph 8, it should be noted that in any case the plaintiffs do not claim that by virtue of their inheritance they have the right to manage the companies or that the defendants are not entitled to continue to manage them).  In fact, since the time of his death, the plaintiffs were not involved in the management of the companies and according to them they have no intention of being involved: "I want to receive what I and my younger brothers deserve and to separate, I don't want anything to do with these things anymore, I want to get what I deserve and continue with our lives" (Tal at p. 37, paras.  13-15).
122. Tal was asked if during my life Eli "made a living from all these companies, " and she replied: "I don't know, but we lived at a high standard of living, and it was as if it had just stopped since he passed away" (p. 37, paras.  29-32).  Her testimony also shows, and from the very existence of the additional proceedings pending in the Family Court, that there is a severe crisis of trust between the parties: "All the interaction I had with my uncles was only in the courts where they often hurled statements against me and my brothers, towards my father, once in the hearing it was said by Yoram that before the hearing he went and urinated on my father's grave before he arrived" (p.  32, paras.  8-11); "We were told that they would take revenge on us" (p.  32, s. 13); "Ronen told my sister that he would also, if he needed to, he would also sue us, in one of the discussions with the executor of the estate it was said that suddenly we had a secret brother, all the way since my father passed away - the interaction towards us was in a very unpleasant way, in a very blunt, insulting way, with threats of one kind or another that they would do things to us, that would make our lives miserable, that they would not leave us anything, and therefore I never approached direct interaction but only through a lawyer" (p.  32, paras.  15-20).
123. I will note that during the meetings, Tal and her sister, not even during Tal's testimony, burst into tears, and it was clear that the whole situation was difficult and stressful for them, especially when things were said against their mother: "It has nothing to do with my mother at all, this lawsuit talks about the fact that I and my younger brothers did not receive a single shekel from the moment my father passed away, one shekel for nothing, the three of us - we have nothing to do with friendship, The three of us are in the army, I'm in regular service, Ron is in regular service, Amir is in regular service, I have nothing to do with friendships, all I want is to get what I deserve and end the engagement with them, because it just doesn't allow us to move forward in life, neither on a personal level nor on a mental level" (p. 32, Q. 22-28).  I got the impression that this is indeed the case.
124. Therefore, and in accordance with the rulings reviewed and mentioned above, I have reached the conclusion that we are dealing with a private and family company, which operates as a "kind of partnership"; I got the impression that there is a murky relationship between the parties, as evidenced by the additional legal proceedings that are being conducted and will be conducted in the past, inter alia with regard to the plaintiffs' residence; I have reached the conclusion that there is indeed a deep crisis of trust, see Tal's words at p. 34, s. 32 to p. 35, s. 3: "But you yourselves claim that there is a lack of trust, because Yoram is suing my dead father for being an unreliable and financially superior person. So you can't say there's no crisis of trust if you yourself sue my dead father for being an untrustworthy person and a crook, so how, and you desecrate his name after he dies, so don't come and say there's a good relationship of trust when in another lawsuit you say no."
125. Not only that. I got the impression that the acts of discrimination have been going on for years, since Eli's death in 2017, and that this is not a specific case; I got the impression that there are power disparities between the parties - the mature and experienced uncles, the founders of the company, and the younger nephews who are not involved in the management at all; I got the impression that it is not possible to sell the shares to any third party, in the existing constellation; I have reached the conclusion that there is no more moderate remedy that can be granted to the plaintiffs - such as the appointment of a director or the distribution of dividends, since this is not the essence of the lawsuit; I have reached the conclusion that the plaintiffs are not interested in and are unable to manage Ohev Zion Investments, and therefore pricing is not on the agenda.  In the case at hand, it is justified to order a mechanism of forced purchase in the manner described below, even if the plaintiffs remain shareholders in other companies.
126. With regard to the date of the valuation of the shares, I refer to the words of Justice Sharvit in the Tal case in chapter D.3 (paragraphs 150-172) of the judgment, where it was stated: "Thereis no absolute rule as to the date on which the value of a company should be assessed for the purpose of the remedy of a forced purchase, when the court has broad discretion in this matter, mainly for considerations of justice in the individual case before it. It seems that in most cases the date of the valuation will be the date of filing the claim (as by default according to the case law in England) or the date of the deprivation or some date in between.  As for myself, I tend to prefer by default the date of the valuation to the date of filing the claim for the remedy of forced purchase, since this is the date on which the plaintiff expresses his desire for separation, while reserving broad discretion for the court to set a different date for considerations of justice." At this stage, I adopt this position.
127. In view of the aforesaid and detailed above, I order as follows:
128. The plaintiffs' shares in defendants 3-4 will be purchased by the defendants in accordance with the ratio of their holdings in the companies, in exchange for equal payment, as will be determined below.
129. The parties will notify the court, within 14 days from the date of the judgment, of the agreed identity of the expert for determining the value of the shares as of the date of filing the claim. If the parties are unable to reach an agreement, the court will appoint a valuation expert on its behalf.  The expert will provide the court with a declaration as required regarding the absence of a conflict of interest.

• The expert will be entitled to demand from the parties any document, data or information required by him in order to perform his work, and the parties will make available to him all the required knowledge and documents, taking into account that the control and management of the companies are in the hands of the defendants. Any document that the expert receives from one of the parties will be forwarded to the other party for review.

1. The expert will submit his opinion within 90 days from the date of his appointment. In the opinion, the expert will also address the relevant dispute regarding the amount of the owners' loans in defendants 3-4, all at his professional discretion.  If the expert finds this dispute relevant, he will detail the possible routes for calculation.
2. His salary will be paid at this stage by the companies and an account will be made upon the issuance of a final judgment.
3. The expert's opinion will serve as a basis for determining the consideration to be paid to the plaintiffs, the parties will be entitled to submit substantive comments to the assessor regarding the opinion within 14 days from the date of its receipt, and the expert will be entitled, at his professional discretion, to amend or complete his opinion within an additional 14 days.

• After receiving the expert opinion (after it is amended, if requested), it must be submitted to the court, and after the parties' position is requested, my instructions will be given to end the proceeding and give a final ruling. In the final judgment, I will also address the issue of expenses.
• The file will be brought before me for an internal reminder on March 14,2027.

Given today, October 21,2026, in the absence of the parties.