A shareholder of a company that develops aviation products demanded that the company's board of directors submit a derivative claim against a third party but the board refused.
The Court rejected the claim and held that the business judgement rule applies in Israel and as long as the decision of the board of directors was received in a proper process, meaning on the basis of all material information, in good faith and without a conflict of interest, it will not intervene in the decision even if it believes that the decision is erroneous, due to the rule of non-intervening with the business judgement of the board of directors in the internal management of the corporation. The rule applies also to a decision of the board of directors to exercise or not to exercise the company's right to claim, especially when the derivative claim is requested against a third party.