A shareholder and officer may not compete with the company even if it is inactive

Two entrepreneurs founded a startup venture of procurement and recruitment in the field of human resources, but after a short period they shot down the activity of the company. The entrepreneurs did not carry out an orderly separation of powers and remained shareholders and directors in the joint company. One of the entrepreneurs turned to a new path and founded a new company that practiced in a similar field.
The Court accepted the claim and held that the entrepreneur infringed his fiduciary duty to the company and to the other shareholder.
Under Israeli law, a company officer owes a fiduciary duty to the company and must act "for the benefit of the company", meaning, not to prefer a personal benefit over the benefit of the company. Thus, an officer must avoid any action that competes with the company's business and avoid taking advantage of the company's business opportunity in order to obtain a benefit for itself or another. The question of whether a business opportunity belongs to the company shall be examined regardless to the question of the company's ability or inability to carry out the transaction. Here, the parties jointly established a company for the benefit of a startup venture without a founders’ agreement, this is after developing a product within the framework of a partnership that existed between them prior to that. The newly established company operated in a similar field and made use of the previous company's resources, including experience and reputation, for the purpose of business development with investors and potential customers. The way to be freed from the duties and restrictions that apply to an officer, in the absence of a founders agreement regulating this, is to act to dissolve the company or to resort to a separation procedure (such as: bidding). The competing entrepreneur took matters to its own hands while competed the company's business before performing a 'separation of powers' and thus infringed its duties, both as an officer and as a controlling shareholder, because it took advantage of the company's business opportunity while depriving a company shareholder.