Following the passing of the controlling shareholder in a family company, two-thirds of his shares passed to his heirs, while his partner, holding one-third of the shares, remained the sole director of the company. When a dispute arose between the parties regarding the arrangement of the management structure in the company, the heirs, who had become the majority shareholders, convened a general meeting in the absence of the partner and resolved to dismiss him from his position as director and to revoke his powers and authorizations in the company.
The Court held that the resolutions of the general meeting are void, but the situation will not be restored to its previous state. As a rule, in a private company, the majority shareholders are subject to the rules applying to the convening and summoning of a special meeting and in the case of a director's dismissal, he must be given a reasonable opportunity to present his position. However, a defect in convening the meeting or summoning it does not entail automatic nullity of its resolutions, but grants the Court the discretion whether to void them, taking into account, inter alia, the severity of the defect, the passage of time, and the implications of the nullification on the management of the company. Here, fundamental defects going to the root of the matter occurred in the convening of the meeting and in inviting the director to it. The heirs did not precede it with a formal demand to convene the meeting, nor was it proven that the invitation to the meeting reached the director prior to its convening. Nevertheless, given the passage of years, the director's contribution to the situation created and the fact that even according to him there was room to integrate the heirs into the company's management, the meeting's resolutions are cancelled without restoring the situation to its previous state. Therefore, no status change will be made until a new meeting is lawfully convened, in which the director will be given the opportunity to present his position regarding his dismissal.