Shareholder and partner disputes

A dispute between partners almost never starts in court. It starts with a decision taken without the other owner, a salary one of them voted himself, a client moved to another company. From that point the question is not who is right but who prepared: who gathered the documents, who kept a seat on the board, and who did not sign what should not have been signed.

What clients come to us with

• One partner runs the company as personal property and shuts the other out of decisions and information.
• The shareholding is diluted by an allotment designed to reduce the minority’s weight.
• Money or clients are diverted to a parallel company owned by one of the partners.
• A director acts under a conflict of interest and breaches the duty of loyalty.
• The partnership has run its course and the owners need to separate — at a fair value and without destroying the business.

The tools that actually work

An oppression claim under the Companies Law allows the court to intervene in how the company is run, including ordering a buy-out of the minority’s shares at a price the court sets — the remedy most often sought in these disputes.

A derivative action is brought in the company’s name against whoever harmed it, where the controlling owners will not sue themselves.

Interim relief — injunctions, attachment of assets, appointment of a receiver — usually decides the outcome, because it freezes the position before assets disappear.

Winding up on just and equitable grounds is reserved for cases where trust has broken down completely; the mere filing of such a claim shifts the balance in negotiation.

Where the outcome is really decided

Not in the courtroom. Most of these cases end in agreement: a mutual buy-out, a BMBY mechanism, a split of the business lines. The terms of that agreement are set by the strength of the case you have built — board minutes, correspondence, financial statements, the founders’ agreement and the articles. So our first task is not a statement of claim but a review of the documents and an answer to what can be done now and what will later be read as a waiver.

Prevention: a founders' agreement that works

Most of the conflicts we see could have been blocked by a single clause in the founders’ agreement: an exit mechanism, a valuation method, veto rights, non-competition, and ownership of intellectual property created inside the company. We draft founders’ agreements and articles for clients who are in no dispute at all — it costs a fraction of litigation.

Frequently asked questions

I do not hold a controlling stake. Is there anything I can do?

Yes. Being a minority holder is not the same as being powerless: oppression claims, derivative actions and interim relief exist precisely for this situation. In practice a minority holder who moves correctly often secures a buy-out above the price first offered.

How long does such a dispute take?

Full proceedings usually run for years, but most cases settle earlier — once the question of interim relief has been decided, and that takes weeks. The first months matter far more than the second year.

My partner is withholding documents. What now?

A shareholder has a right to inspect company documents and a director an even broader one. Where information is withheld, an application for disclosure is made; the refusal itself is treated by the court as evidence.

Can this be resolved in arbitration instead of court?

It can, and often should be: arbitration is faster and confidential, which matters while the business keeps trading with clients and suppliers. Everything turns on the arbitration clause in the agreement and on the identity of the arbitrator — two details worth negotiating carefully.

My partner is moving clients to another company. Is that lawful?

In most cases it breaches the duty of loyalty and the non-competition undertaking, and it can amount to a commercial tort. The diversion must be documented as it happens; proving it after the fact is hard.

What does running such a case cost?

In commercial disputes we work on a fee agreed in advance, usually combining staged payments with a success component. We give the estimate after reviewing the documents at the first meeting.

Contact us

Tel Aviv, 125 Menachem Begin Rd (Kiryat HaMemshala), floor E2; Ashdod, 6 HaGdud HaIvri St, Top Sea Mall, 20th floor, office 9. Sunday to Thursday, 09:00–18:00, by appointment. Phone 08-8648090, WhatsApp 058-764-8090, yoffe.law@gmail.com.