Legal Updates

A claimant company in liquidation is required to deposit a guarantee to secure expenses of defendant

November 5, 2020

Office Depot (Israel) Ltd.’s liquidators filed a claim in the amount of ILS 50 million against some of the company's officers.
The Court held that the company must deposit an ILS 200,000 guarantee, because the fact that a company is in liquidation has an effect on the amount of the guarantee, rather on the need to deposit one. Israeli law sets a presumption that a company must deposit a guarantee when a request is made, unless shown economic ability or other circumstances justifying exemption from depositing a guarantee. In addition, the chances of the claim may also be reviewed, but only when these are very high or very low. Only after it has been determined that a company must deposit a guarantee, a proportionate guarantee amount will be determined, while balancing both parties’ interests, including, here, the liquidators’ interest in attaining value for the company’s creditors. Here, the company’s financial situation, the claim’s complexity and the amount of the claim indicate the need of depositing a guarantee. However, due to the need to preserve the liquidators’ interest, the proportional amount would be set on a lower amount than otherwise would be held.