When it comes to a closely-held company separation can be ordered even without deprivation

November 10, 2019

A minority shareholder in a company managed as a partnership moved for separation due to lack of trust and to acquire its partner shares.
The Court accepted the claim and held that the separation in the company will be by way of a forced purchase whereby the minority shareholder has the right to acquire the majority shareholder’s shares. Israeli law give the Court broad discretion when granting remedies in case of oppression, including providing for separation through a compulsory acquisition in which one shareholder, who is most closely related to the company and its business, acquires the other’s shares at a price determined by an appraiser. When it comes to a closely-held company, relief may be granted even if no oppression was shown, when shareholders are at a standstill and there is a loss of trust that cannot be bridged. Here, the company operated as partnership and its only asset is a hotel. There is a deep trust crisis between the shareholders which requiring separation and the minority shareholder and his family have close ties to the hotel, among other things, because they were actively and intensively involved in the hotel’s operations. Thus, the minority is entitled to purchase the shares of the majority shareholder.