Legal Updates

An amendment of a dule made resolution of the general meeting can only be done in accordance with the articles of associations

May 4, 2021

A shareholder in a start-up Company demanded the cancellation of appointment of another director, based on a veto granted to him under the investment agreement, according to which without his consent the company cannot make any change of management structure, although a representative on his behalf voted at the board of directors to amend the articles of association so that it would be possible to appoint another director.
The Court held that the company decision to appoint the director should not be interfered with. A right of veto over a change in the management structure does not confer a right of veto on the identity of the members of the management. A shareholder must exercise his rights fairly, in good faith, and for the benefit of the company. The appointment of a director must be made pursuant to the law so that there will be no issue of improper connections, the existence of personal interest, the grant of a benefit, etc. Here, after his appointment, the director acted diligently and was found to have skills and connections that contribute to the company affairs, and his appointment does not, or is likely to, infringe on the rights of any of holder of rights in the company and is not dependent on its controlling shareholders. The contentions that the appointment of the director was made without the consent of the holder of the veto right does not justify intervention in the company decision. The only way to legally revoke the appointment of a director is according to the provisions of the articles of association. Thus, there is no place for intervention in the decision of the general meeting to appoint the director.