Minority shareholders in a company sought to halt the implementation of a board of directors' resolution to establish a data center requiring a major investment by the company, as they contended that the decision breaches the shareholders agreement, constitutes a deviation from the company's fields of activity and amounts to minority oppression.
The Court held that there is no justification for intervening in the board's resolution. Clearly, as long as a company is a party to a specific agreement, the board must act in accordance with the limitations of that agreement. However, a shareholders agreement is, as its name implies, an agreement between the shareholders, the company is not a party to it, and therefore, as long as the provisions of the agreement have not been adopted into the company's articles of association, is not binding on the board of directors. On the contrary, the board is obligated to act within the powers granted by the legislature and to act in the best interests of the company and not necessarily for the benefit of its shareholders, whether all or some of them. Here, the company is not a party to the shareholders agreement, which included only some of the shareholders and is not part of the company's founding documents, as it was signed many years after the company's incorporation. The provisions of the shareholders agreement were not adopted into the company's articles of association. Consequently, the board is not bound by the limitations of the shareholders agreement and is required to make decisions through proper examination, within an appropriate corporate process, and for the benefit of the company rather than for the benefit of any of its shareholders. Furthermore, in this case, the non-implementation of the board's decision would likely lead to the complete cancellation of the project, whereas withholding the remedy would, at most, result in monetary damage. In light of the above, there is no justification for intervening in the board's decision.