In a fintech company held by two shareholders who also serve as its directors, a deep dispute has arisen between the shareholders. The parties did not reach an agreement on a separation mechanism, but in the meantime, the lack of cooperation has paralyzed the board of directors to the point that one of the shareholders sought that the other be removed from the board of directors and prohibited from voting therein.
The Court granted the motion and prohibited one of the directors from attending the meetings or voting therein. A shareholder in a "quasi-partnership" company has a substantial right to appoint a director and to participate in the management of the company and the board of directors, but this right does not grant a shareholder full immunity from the removal of the director on his behalf. In the event of a dispute between shareholders in a company, and even before a decision is made on a separation mechanism, the Court may take actions that will preserve the company and ensure that it survives until decisions are made. These actions may include, in extreme cases, the removal of a director from his position and a prohibition on his participation in the board of directors, where his behavior breaches the fiduciary duty imposed on him and he may harm the company and cause damage to it. This is also the case in a "quasi-partnership" company, in which such removal has a material impact on the ability of the “partner” to influence the company's conduct. Here, the director's behavior was unusual and extreme, including threats against offices, violence and surveillance of the other director, and it is clear that he did everything in his power to interfere with, and thwart, the company's activities in a manner that constitutes a breach of his fiduciary duty and which justifies his removal from the board of directors. Therefore, the shareholder was prohibited from attending board of directors meetings, taking part or voting therein and instead he was only allowed to appoint a non voting observer.