Legal Updates

The sale of private company shares can not be blocked in the absence of a clause in the Articles of Association restricting this right

May 9, 2021

As part of a dispute over a family business that includes a group of private companies in the field of kitchen manufacturing and sales, two sisters moved to prevent their brother from selling to a third party shares in the companies that are held by the three of them.

The Court held that the brother should not be prohibited from selling his shares. Unless there is a clause in the articles of association that prohibits this, one cannot limit the sale of shares of a company. The existence of a legal proceeding between the parties does not limit this right, nor can the right of sale be restricted for an unfounded fear that the shares will be sold to a "straw man" on behalf of the brother or to a dubious party. Here, there is no clause of the articles of association that prevents the sale and although upon the sale of the shares the companies are at a loss, the existence of legitimate commercial considerations on the part of the potential buyer should not be ruled out. In case that in the future it will be determined that the sale of the shares by the brother was an eye-wash, it will be possible to hold that the sale is invalid. Thus, the sisters' motions were denied.