Legal Updates

It is possible not to enforce the employment contract of the CEO even in contradiction of the articles of the comapny for reasons of company benefit

August 13, 2023
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Published in Afik News 395 06.09.2023

The CEO of a company claimed that the decision of the company's board of directors to fire him was made in violation of the company's articles of association, which granted this authority exclusively to the shareholders, and this when the CEO has, despite being a minority shareholder, a right of veto over the resolutions of the general meeting of the company.

The Labor Court confirmed the termination of the CEO and rejected his claim, inter alia, due to considerations of the company's best interests. Although when termination is not made by the authorized body of a comapny, it is not a minor defect but a defect that goes to the root of the decision to dismiss but sometimes it may still be enforced despite breach of the articles of association of the company. Here, it is a CEO who owns only 16% of the share capital and seeks to use his veto right under the articles of association in order remain in his position against the will of the other shareholders and against the company's best interest, for the sake of improving his position in a bidding process he initiated. Therefore, the company's best interest obliges not to force the company to continue his employment.

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