After the general assembly of shareholders in a public company rejected the decision of the compensation committee and the board of directors of the company to grant the CEO a special bonus that deviates from the company's compensation policy, the bonus was approved via an "overruling" decision.
The Court dismissed the company's motion for summary dismissal of a request for discovery of documents in a derivative action, due to flaws in making the "overruling" decision. The Israeli Companies Law stipulates that a transaction of a public company with its general manager regarding their terms of employment requires the approval of the compensation committee, the board of directors, and the general assembly. However, the compensation committee and subsequently the board of directors may approve such a transaction, despite the opposition of the general assembly ("overruling"), subject to the fulfillment of four cumulative conditions, including: a renewed discussion, a discussion on the assembly's opposition, and the existence of a special case. Here, this is a case where the "overruling" decision did not specify why it constitutes a special case, it was not proven that a renewed discussion took place, and it was not proven that there was any reference to the shareholders' opposition or the reasons for their opposition. Hence, the company's motion to dismiss the request for discovery of documents for the purpose of filing a derivative action was denied.