As part of a dispute between shareholders of a private company it was argued that a shareholder who holds half the shares of the company is excluded from the decision making process and is oppressed by taking unreasonable expenses for office holders of the Company at the expense of distribution company’s profits and by harming the legitimate expectations of a shareholder to enjoy the company's profits. The Court held that in a closely held private company there is a legitimate expectations of shareholder to be involved in the management of the Company and there is no impediment to file discrimination claims by a shareholder who holds a 50% stake in the company, as long as the remaining shares are held by a single shareholder who also holds 50% of the Company. The profits of a private company does not lead to an increase in share value and thus avoiding distribution of dividend excludes the shareholder's ability to benefit from them. However, in the absence of a specific stipulation in the articles of the company which requires the distribution of dividends, there is no oppression if the salaries of office holders of the Company do not exceed the market norm and no actions are aimed at distribution of profits in an unequal manner. For this reasoning the claim was dismissed.
Related articles
A condominium committee may refuse to approve the transfer of rights to a potential purchaser by virtue of its authority in the bylaws
Real estate in Israel and around the world
Dispute Resolution
The condominium committee of an apartment hotel refused to approve a transfer of rights by virtue of its authority under the condominium bylaws, due to the purchaser’s behavior and an assessment of his unsuitability to the hotel’s rules. The Court rejected the purchaser’s claim and held that the condominium committee acted lawfully according to its […]
Consideration for non-competition will be classified as labor income even in the absence of an employer-employee relationship between the parties
Labor Law
Dispute Resolution
Taxation and Government Incentives and Funding
Purchaser of a company’s operations and assets paid the previous owner and manager of the acquired company for his undertaking to refrain for 3 years from performing activities competing with the acquiring company’s operations. The Court held that this constitutes labor income, as it does not eliminate the recipient’s ability to resume earning a living […]
Revival of a liquidated company requires actual past business activity or a legitimate justification for restoring it to the registry
Business, Corporate and Joint Ventures
Dispute Resolution
A sole shareholder of a company that was voluntarily liquidated after never having engaged in business activity, sought to revive it. The underlying purpose of the proceeding was to utilize the company’s corporate seniority to meet threshold requirements and participate in construction tenders. The Court held that the conditions allowing for the cancellation of a […]
Familial proximity does not by itself rule out the existence of an employment relationship
Labor Law
Dispute Resolution
A lawyer was employed as a salaried employee in a law firm owned by her husband and the National Insurance Institute refused to pay maternity pay contending that she worked as an independent contractor, inter alia, because her salary as an employee significantly exceeded her husband’s profits, no employment contract was signed and no replacement […]