Legal Updates

A motion for liquidation filed in order to apply pressure is in bad faith and will be rejected even if technically the company is insolvent

January 2, 2018

An ILS 18 million dispute between a flour supplier and a food-producing company was settled by a mediation agreement. When the agreed amount was not paid, the supplier sent a demand letter and then filed a request to liquidate the company.

The Court held that there is an unsettled debt of ILS 15 and therefore, under the language of the law, the company is insolvent. However, in cases where a liquidation motion is submitted in bad faith and for the purpose of achieving foreign objectives, the Court will reject the motion, especially if it is a means of applying improper tactical pressure to achieve another goal. The Court also examines the damages that will be caused to third parties from the liquidation and whether any benefit will be made to the applicant for liquidation as a result of the process. Here the whole purpose of the liquidation motion is to circumvent the mediation agreement that was reached and apply unfair pressure to bring about the realization of assets that the mediation agreement set that such will not be realized and therefore the motion for liquidation was rejected.