Legal Updates

In order to remove discrimination against a shareholder, the Court has full independence in choosing the appropriate remedy

February 1, 2018

In a family company founded by two brothers, a dispute broke out between one of the brothers and the heirs of the other. The heirs contended that their rights as shareholders were oppressed by being excluded from company management and operations and transactions. The heirs contended that the auction mechanism between the parties determined by the Court deprives them because they do not have all the information about the company and thus created an unfair advantage to the other shareholder.

The Supreme Court held that when it comes to the removal of oppression against a shareholder in a company, the Court generally has three paths to take: the dissolution of the company – an extreme relief that is generally appropriate to a situation in which a company reached a dead end due to loss of trust among its shareholders and should be avoided if there is an alternative relief; Forced acquisition - the obligation of one of the shareholders to acquire the other’s holdings according to their value, based on an objective valuation, and this is usually the appropriate remedy; Or auction between the shareholders, when one of the shareholders acquires the other under a mechanism set by the Court. The method of auction may be unfair when one party has an economic advantage over the other. In this case, dissolution is an extreme relief, neither party has an economic advantage over the other, and in the course of the legal process, a great deal of information has been disclosed and an accounting opinion was submitted, and therefore the Court rejected the claim of information gaps and rejected the appeal.