The New Class Actions Law
In two Court rulings handed down recently, the Court imposed personal liability on the D&Os towards employees of the company.
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Recently two Court rulings were handed down, in which the courts referred to several aspects of a derivative claim: Only in rare circumstances will a derivative claim be dismissed in limine; a Derivative Claim Cannot be Filed by a Former Shareholder.
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In two recent judgement handed down by the District Court of Tel Aviv the court discussed the implication of placing criminal liability on directors and officers and reached contradicting conclusions.
Recently the District Court of Tel Aviv adopted a narrow interpretation to Regulation 482 in order to prevent potential plaintiffs from taking advantage of the willingness of foreign companies to resolve disputes between the parties in order to subject them to the jurisdiction of the Israeli Court system.
On 24 April 2009 the Haifa District Court handed down its decision in an insurance claim filed by Sky Club Ltd - C.F.270-00. In its decision, the District Court ruled that an insurer which failed to pay insurance benefits on time may be obliged to compensate the insured for the damage it suffered as a result of the delay.
By Adv. Yael Navon
Very rarely do Israeli Courts address the interpretation of D&O Liability Insurance policies. Almost all insurance claims against D&O insurers are settled out of Court and therefore, there are very few Court judgements which refer to such policies. One of these judgements is C.A. (Haifa) 4600/07 Kenge Mansur v. Sahar Zion Insurance Co. Ltd. and the Carmel Local Council, which was handed down by the Haifa District Court on 28th September 2008.
By Adv. Addy Margalith
Two recent amendments to the Israeli Companies Law (1999) have an effect on D&O's liability, as well as on the basic requirements for their appointment as such.
The Haifa District Court determined that when a motion to approve filing of a class action against various companies and their D&Os included too many different and unrelated occurrences on the one hand and different allegations relating to each of those occurrences on the other hand, a Class Action is not the most efficient manner in which these disputes should be discussed.
The Israeli Supreme Court has determined on several occasions that, in principle, whenever the value of the company's shares decreases, the primary loss is caused to the company itself rather than to its shareholders. Hence, since the loss to the shareholders is a secondary indirect loss, they have no personal cause of action against those allegedly responsible to the decrease in the value of those shares. Only when a shareholder sustains a direct loss as a result of a D&O's wrongful act, he has a personal cause of action against that D&O.
The Companies Ordinance grants the liquidator the authority to investigate the reasons which led to the liquidation, and to file personal claims against its directors and officers.
By Adv. Yael Navon, and Adv. Addy Margalith
In cases in which a D&O of a company was personally involved in the breach of the company's duty towards its employees, the court may impose personal liability on the D&O, although he or she is not considered as the "employer".
When Renata Kotwitz, an 85 year old woman, was visited by a person claiming to be a certified beautician representing a respectable firm, she agreed to buy a line of cosmetic products from her for several hundred US Dollars. After she applied one of the products she had just bought, her face began to swell and her skin turned red. She described the feeling as if her "face caught fire".
By Adv. Rachel Levitan and Adv. Moshe Abady
The Israeli Companies Law - 1999 (hereinafter: the Law), provides the framework according to which a company is permitted to indemnify its directors and officers.
The law also lists the cases in respect of which a company is permitted to purchase a D&O liability policy for its directors and officers.
These provisions are cognitive and cannot be stipulated against.
On 7th March 2005 the law was amended and various changes relating, inter alia, to insurance and indemnification of D&O’s came into force.
Another provision was amended in respect of piercing the corporate veil against a D&O of a company.
Statistics regarding D&O Liability in Israel, Main Aspects of the Companies Act Relevant to D&O Insurance, Piercing the Corporate Veil, Criminal Investigation & Proceedings Comparison between the Companies Act and the D&O Policy
On 19th April 1999, a new Companies Law was enacted by the Israeli Parliament . This law entered into force on 1st February 2000 and replaced the Companies Ordinance - 1983 (hereinafter: “the Ordinance”).
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