Court ruling9/17/2026

Court Denies Shareholder Veto Right and Appoints External Director

The Tel Aviv District Court intervened in a protracted dispute between the shareholders of the public company "Avrot Industries," which had prevented it from appointing a second external director. As interim relief, the court disregarded the vote of minority shareholder Gabriel Magenzi and appointed Ayelet Nahmias-Verbin.

Key facts

•Court: Tel Aviv District Court
•Case number: Not stated in the source
•Decision date: Not stated in the source
•"Shapir Engineering": 55% of the shares
•Gabriel Magenzi: Approximately 28% of the shares
•Relief: Interim, pending a ruling in the main action

How the Deadlock Arose

"Shapir Engineering" holds a controlling 55% stake in "Avrot Industries," while Gabriel Magenzi holds approximately 28%. When an external director was to be appointed, each side blocked the other side's candidates: Magenzi did not support the company's candidates, and "Shapir" did not support the minority shareholders' candidate. This led to a managerial deadlock that, according to the source, harmed the company's business operations.

Why the Position Is Important

A public company is required to have two external directors serving on its board. Their presence is required, among other things, to convene key bodies, including the audit committee. A candidate for the initial three-year term must secure not only an ordinary majority at the general meeting, but also the majority prescribed by law among shareholders who are not affiliated with the controlling shareholder.

What the Court Decided

The court ruled that Magenzi's vote should be disregarded and appointed former Knesset member Ayelet Nahmias-Verbin as an external director. It acknowledged that disqualifying a shareholder's vote is an exceptional step, but noted that the law does not provide a solution for this type of deadlock. As the basis for its decision, the court cited the need to balance protecting the minority from the controlling shareholder against preventing a situation in which a large minority shareholder completely paralyzes the appointment process.

The Decision Is Not Yet Final

The decision was issued in the context of an application for interim relief and is subject to the future ruling in the main action. The court also noted that the legislature or regulator should formulate a systemic solution to this type of problem. Magenzi announced his intention to appeal the decision; the outcome of any potential appeal is not stated in the source.

What this means for you

The decision indicates that a voting right intended to protect minority shareholders will not necessarily permit them to indefinitely block a mandatory appointment to the external bodies of a public company. In exceptional circumstances, the court may employ an alternative mechanism and temporarily disregard a shareholder's vote if the dispute paralyzes management. However, this decision is not yet final and may be appealed.

Find a lawyer for this topic

Case analysis based on court rulings