A Hebrew legal explainer argues that small companies often stop behaving rationally once co-founders fall out, turning into what it calls an “ego tax” in which both sides spend heavily on lawyers, damage the business and fight simply to make the other side yield. The piece says these deadlocks are especially common in closely held firms, where trust disappears and standard corporate bylaws are often useless.
To illustrate the problem, it cites three Israeli disputes. In Panda Yishumey Mischar, founded in 2007 by Shmuel Gutman and Maor Leav, equal 50-50 ownership without a founders’ agreement led to a management deadlock so severe that the Haifa economic court appointed an external tie-breaking director. The court later ordered the company sold to a third party and imposed 3 million shekels in legal costs on Leav, including 2.5 million to his partner and 500,000 shekels to the company. Israel’s Supreme Court rejected Leav’s appeal in May 2026.
The second example is CybAera, the Israeli cyber company bought by Palo Alto Networks in 2014 for about $220 million. Founder Moshe Ben Abu sued Natanel Davidi and Uri Alter, alleging he was pressured into signing away shares before the exit. The district court accepted his claim of exploitation and awarded him about 20 million shekels, despite the signed waivers. The founders appealed, but the dispute ended in a 2020 settlement outside court that nullified the ruling.
The third case, the oil exploration partnership Gevot Olam, involved an eight-year control battle among the founders, the general partner and minority shareholders. The litigation froze drilling plans, hurt investor confidence and slashed the partnership’s market value. The Supreme Court ended the main case only in 2022, and in 2026 one founder’s stake was bought in a forced auction for much less than its original value.
The article says these fights could have been avoided with a properly drafted founders’ agreement, built-in breakup mechanisms such as BMBY, and an agreed valuation formula. Its bottom line is that legal battles in closely held companies are usually zero-sum, and by the time a ruling arrives, the company may already be badly weakened or effectively dead.
