The key issues arising from this case report all seem to be tied to the CEO Anat’s decisions and relationships in regards to the firm, especially in the context of her duties as a director of the firm. As such, three issues emerge from Anat including the decision to hire her cousins Ellen and David to work for the firm by managing office building without informing or consulting the Board. The second issue is the where the liability of the damage suffered by Liav, who fell due to a cost-cutting decision by Ellen and David, on the company or Anat for her hiring decision. Finally, the third issue is whether any fault lay with the decision to sell the office building to Buyer Ltd where Anat’s spouse is a beneficiary.
The amendment to section 270(4) to the Companies Law made it mandatory for that the Public companies approve of the hiring and the work conditions of a relative a controlling shareholder such as Anat. The law means that hiring a relative is considered an extraordinary and therefore such a decision required special approval. Therefore, Anat’s decision to hire David and Ellen was supposed to be approved by an informed board of directors. Consequently, if the company is held liable for Liav’s fall and subsequent damage it can sue Anat’s for the costs considering the hiring of the employee who made the cost cutting decision was made without proper approval.
Regarding the sale of property to Buyer Inc where Anat’s spouse, Habib owns five percent of the common stock, Anat was under a fiduciary duty to disclose her personal interest under Article 276 of the Companies Act. However, it is evident that in the report sent to both directors the personal interest was disclosed and their failure to read the 50-page report as per their duty as directors does not negate the fact that they were provided with the information well before the decision to sell the office building was decided.
References
Sharvit, O. (2005, April 27). Public Companies to Report More on Employment of Family Members. Haaretz, p. 2. Retrieved from http://www.haaretz.com/print-edition/business/public-companies-to-report-more-on-employment-of-family-members-1.156995
Virtual Library. (2011, February 11). Companies Law 5759-1999*. Retrieved from Jewish Virtual Library: https://www.jewishvirtuallibrary.org/jsource/Politics/CompaniesLaw57591999.pdf
