A divorce dispute led to a motion to include real estate corporations managed by the husband as direct parties to the proceedings, within the framework of the joint property, with the intent of preventing the dissipation of assets.
The Court partially granted the motion for the joinder of the corporations. The Israeli Family Court Law grants the authority to join any person or entity required as a party to the proceeding, regardless of the value involved, for the purpose of "piercing the corporate veil" and exposing assets accumulated during the marriage. Such joinder subjects the corporation to direct Court orders, enables effective remedies and prevents the siphoning of assets to third parties. However, when joining corporations in which there are external shareholders, increased caution must be exercised to prevent significant business harm to parties who were not involved in the dispute. The Israeli Spouses Property Relations Law allows the Court to instruct the Registrar of Companies to record cautionary notes for the preservation of rights even prior to the actual distribution of property. In the instant case, corporations under the husband’s full control were joined and the Court issued an injunction prohibiting any disposition of all shares held by the husband in these companies, as well as all rights he holds in various assets subject to the wife depositing a personal undertaking. Conversely, in accordance with the principle of increased caution, corporations with external shareholders were not joined as parties to the lawsuit, in order to avoid unnecessary business harm to third parties.