Supreme Court Allows Temporary Director to Continue at Plastube Company

Former Member of Knesset Ayelet Nachmias-Verbin will continue to serve as a temporary external director at the company "Abrot" (Plastube), a manufacturer of plastic pipes and water and sewage contracting, until further notice. This decision was made by Supreme Court Justice David Mintz, who dismissed Gabi Magnezi's request to appeal a Tel Aviv District Court ruling.

Abrot, valued at NIS 226 million, is 55% owned by Shapir Engineering and 28% by Magnezi. The relationship between Shapir and Magnezi is described as strained, leading to past deadlocks on company decisions, including director appointments. Israeli company law requires a majority of non-controlling shareholders for external director appointments, creating a mutual veto power between Shapir and Magnezi.

Last year, Abrot sued Magnezi, arguing his votes should not be counted for an external director appointment due to alleged personal interest or bad faith. District Court Judge Ariel Zimmerman established a unique appointment mechanism: the Directors Association would propose five candidates, Shapir and Magnezi could veto two each, and if Magnezi abstained from voting for remaining candidates, his vote would not be counted. This process led to the appointment of one external director.

Recently, during a general meeting in July, Magnezi refused to support the company's candidates for a second external director, prompting Abrot to seek a court order to continue Nachmias-Verbin's temporary role. Zimmerman granted the temporary relief, citing the company's need for two external directors to avoid paralyzing its oversight mechanisms, and the high likelihood of Abrot's lawsuit succeeding.

Magnezi appealed, claiming Nachmias-Verbin lacked the necessary financial and accounting qualifications and that Abrot manipulated the situation. Justice Mintz upheld the District Court's decision, stating that appellate courts rarely intervene in temporary relief orders unless in exceptional circumstances. He noted that the District Court had properly weighed the potential harm to the company from lacking a second director against Magnezi's concerns about Nachmias-Verbin's qualifications. Mintz added that the District Court found Nachmias-Verbin's lack of financial expertise did not prevent her from performing her duties, especially since other directors possessed these skills, and she had relevant experience as a board chair in a related industry. The court also clarified that if her appointment is eventually invalidated, minority shareholders' claims regarding the retroactive effect of her votes would be preserved.