Israeli Government Companies Face Legal Challenge Over Ban on Remote Board Voting
The Director of the Government Companies Authority, Roy Kahlon, recently issued a directive forbidding board members of government companies from voting if they attend meetings remotely rather than in person. This decision has sparked significant outrage among hundreds of directors and is expected to be challenged in Israel's Supreme Court (Bagatz). According to the directive, any votes cast by directors participating via Zoom or similar platforms in meetings designated as in-person will be invalidated.
Critics, including accountants and public representatives serving on boards, argue that the rule is outdated and impractical, especially for directors who must travel long distances, such as from Haifa, to attend brief meetings. They contend that remote participation should be allowed when physical attendance is objectively impossible and the board chair is informed. Kahlon defends the policy, emphasizing the importance of physical presence for effective interaction with company executives and staff.
After failed attempts at dialogue, the Israeli Directors Association, represented by attorney Yoav Hartman, issued a formal warning threatening to petition the Supreme Court to annul the directive. The association claims the rule undermines directors' legal status, disrupts proper decision-making processes, and could invalidate meeting quorums, votes, and board members’ terms. They also accuse the Government Companies Authority of ignoring repeated requests for professional discussions to resolve the issue.
The Directors Association demands immediate cancellation of the directive, cessation of its enforcement across all government companies, correction of any consequences arising from its implementation, and recognition of remote participants as full board members for all procedural purposes. They also call for disclosure of the rationale behind the decision and urgent talks with the authority and the overseeing minister, David Amsalem, to avoid legal proceedings.
The association stresses that the dispute is about upholding the rule of law and proper corporate governance, not about convenience or preference for remote meetings. They vow to continue defending directors’ rights and ensuring fair and professional governance standards in Israeli government companies.
