Court Rules Former Kardan Israel Owner Did Not Conceal Assets from Creditors

A Tel Aviv District Court has ruled that the former owner of Kardan Israel, Yossi Greenfield, did not conceal assets from his creditors when his company distributed a dividend shortly after his bankruptcy proceedings were approved. The court determined that while the dividend distribution itself was not an act of concealment, the proceeds from the sale of Kardan Israel shares and their distribution would be handled according to the creditors' arrangement. Under this arrangement, 80% of the funds will go to Greenfield, and 20% will be transferred to the creditors' fund.

The trustee for Greenfield's assets had petitioned the court, seeking additional payments to the creditors' fund, including NIS 10 million. One of the trustee's main arguments was that Greenfield concealed an increase in his income and failed to report it in real-time, which should have resulted in a NIS 30,000 monthly payment to the creditors' fund as stipulated in the arrangement. The trustee also argued that the dividend approved by Kardan's board shortly after the creditors' arrangement was finalized constituted a significant omission, as it would have provided substantial additional funds to the creditors' pool had it been known.

Specifically, the trustee claimed Greenfield, who chaired Kardan's board during the formulation and approval of the creditors' arrangement, hid the fact that Kardan was set to distribute NIS 85 million to its shareholders. Greenfield, holding 18.85% of Kardan Israel shares, was entitled to approximately NIS 16 million from this dividend, which was paid out three days after his shares were released back to him following the debt arrangement's completion. The trustee contended that if creditors had known about this impending dividend, they would have delayed the arrangement's execution to include it in the creditors' fund.

Greenfield countered that he had no influence over the timing of the dividend distribution and that the possibility of such a dividend was known to the trustee from the outset of the arrangement. He argued the trustee did not act promptly to challenge this claim. Furthermore, Greenfield stated the creditors had no claim to the dividend because his Kardan shares were already pledged to Mizrah Holdings as collateral for a loan he received before the arrangement to cover his debts.

The court rejected the trustee's request regarding the dividend, stating that it was not a hidden asset but rather a known asset whose timing of realization was the issue. The court noted that Greenfield's shares were known to the trustee and creditors, and that Greenfield had the right to redeem these shares. The court also pointed out that the creditors' arrangement explicitly excluded dividends from Kardan Israel shares, except for the 20% allocated to the creditors' fund. The court found that the trustee failed to provide sufficient evidence to support the claim of asset concealment or delayed distribution, especially considering the sophisticated nature of most of Greenfield's creditors who were aware of the potential for such a dividend.