A shareholder sought to appoint for the company an independent auditor contending that the company's existing auditor is in a conflict of interest because he is authorized to report in several companies of one of the shareholders and also that his appointment was flawed.
The Court held that the auditor of the company was duly appointed and is not in a conflict of interest. Israeli Companies Law sets that a company is required to appoint an autditor and convene an annual meeting every year, or at most every 15 months, unless the company's articles of association stipulate that the company is not required to convene an annual meeting other than for the purpose of appointing an auditor and in such a case an auditor may not be appointed for a period of more than 3 years without a reappointment meeting. The auditor is required to be independent of the company and not to engage in any occupation that may create a conflict of interest with his position in the company. Here, the auditor was appointed by the shareholders together upon the establishment of the company and before the dispute arose and the company's articles of association contain clauses clarifying that the appointment is for a period of 3 years. Thus, the appointment was duly made. Additionally, the fact that the auditor was appointed as authorized to report in several other companies of one of the shareholders does not in itself indicate a conflict of interest, because the reporting duty by its nature is a technical one and does not carry material substance. Thus, the auditor was duly appointed and is not in conflict of internet.