Legal Updates

One may not ordinarily file a claim on behalf of a company when the company is being held by two shareholders only

November 30, 2022
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Published in Afik News 377 28.12.2022

Following a dispute between two shareholders of a company regarding the management of the company, one of the shareholders filed a claim against the other on behalf of the company.

The Court rejected the claim and stated that the shareholder is not entitled to raise contentions on behalf of the company. When there is a concern that the manner a company is managed is not in the best interest of the company, a shareholder may, under certain circumstances, raise contentions on behalf of the company. However, when the company is held by a few, raising such contentions may amount to abuse of this tool for the purpose of a personal claim by a shareholder against another. Here, the company has only two shareholders, so that a legal procedure will in fact be of one shareholder against the other and not a collective one. Therefore, there is no grounds to approve a claim on behalf of the company.

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