The IPO and the Divorcee: Will the NIS 4.5 million be deposited?The District Court instructed the real estate company to deposit the money in trust to ensure the rights of a women in a dispute with one of her husbands. The Supreme Court overturned the ruling.
The Supreme Court recently overruled the requirement issued to a real estate company to deposit NIS 4.5 million in trust as a condition for conducting an IPO, in order to ensure the rights of a woman in the company as part of a property dispute with her divorced husband – both of whom are shareholders in the parent company that owns half of the company’s shares. Judge Alex Stein ruled that the company is not related to the dispute and is not required to ensure that her husband meets his debts to his ex-wife.
The couple have been entangled in a property dispute for several years and are still partners in a group of construction companies. As part of their dispute, the wife issued a temporary injunction to prohibit the group’s companies to execute financial transactions that are not part of the course of regular business, without authorization from the Court.
Last March, one of the companies acted in accordance with the order and requested from the Family Court, through Adv. Gavriel Moyal Maor to authorize an IPO, which it claims will improve her status and leave it available cash that could total NIS 18 million. The Court accepted its request and instructed the women to pay the company and her ex-husband expenses of NIS 17,500 plus V.A.T.
However, the District Court subsequently accepted the appeal filed by the wife through Adv. Ruth Dayan-Wolfner and instructed the company to deposit NIS 4.5 million in trust to ensure both her rights in the company and the available money, and to prevent her ex-husband from getting rich at her expense.
Nevertheless, the tables were turned once again following the appeal filed by the company to the Supreme Court, claiming that the District Court erred because the company was not a party to the family dispute, and it was not logical for the company to be required to deposit millions of shekels as a condition for the IPO, which was not a certainty and in order to guarantee the divorcee’s personal debts to his wife.
The divorced husband, represented by Adv. Shiri Malca, joined these claims and emphasized that his ex-wife has sufficient securities, such as seizures, injunctions and rights in properties in Israel and overseas, in order to secure her rights as part of the property dispute.
Conversely, the wife claimed that this security was required to prevent her ex-husband from emptying the company; and in any case, there is no justification to hold a third deliberation on this subject when it holds no legal public importance.
However, Judge Alex Stein was of the opinion that the District Court’s ruling required intervention since it was erroneous. The Judge ruled that there were no legal disputes between the company and the wife and the company certainly was not required to ensure that one of its managers meets the conditions of the terms of the distribution of property with his ex-wife.
He added that the depositing of the funds may be detrimental to the investors and even put them off since it would require reporting. He also ruled that the District Court erred when it ruled that the sum of the security should come from estimated available funds that were only ‘on paper’, and when there is still no judicial decision reached regarding the wife’s rights to the money. The wife is entitled to ensure her stake, he explained, but only from what exists and not from what doesn’t exist.
In any event, the Judge clarified that the wife can protect the money when the time comes, by filing a petition for an injunction on her ex-husband’s money. Additionally, it is reasonable to assume that the Family Court will respond with severity if he tries to take advantage of his position in the company and take possession of funds at the expense of his ex-wife.
Consequently, the Judge reversed the ruling of the District Court and required the wife to pay expenses of NIS 7,000 to the Company and NIS 3,000 to the ex-husband, plus VAT.