"בין האתמול לעתיד, בין האוצר לתחתית": אחריות דירקטוריון בגין חלוקה אסורה

One of the most important decisions in the life of a company is the decision of its directors to approve a dividend distribution to the shareholders. Under the Israeli Companies Law, to qualify as a legal dividend distribution, the distribution must meet two tests: (a) the Profit Test, which requires that the distribution only be made from the company’s profits; and (b) the Solvency Test, which allows the distribution only if there is no reasonable risk that such distribution might deprive the company of its ability to meet its existing and forthcoming liabilities as they become due.In recent years, the courts in Israel have struggled to determine what the appropriate standard of judicial review is, in respect of directors’ decision to approve a dividend distribution which is eventually found to have failed either of the distribution tests and is thus unlawful.With respect to the judicial review of a board of directors’ distribution resolution, this article first proposes to differentiate between a resolution that fails to meet the Profit Test and a resolution that fails to meet the Solvency Test. With respect to the former, which is a retrospective test, based on the company’s financial statements, this article justifies a rather stringent standard of review. In contrast, with respect to the Solvency Test, a prospective test whose outcome is inherently uncertain, this article calls for the exercising of a restrained judicial review of the directors’ decision-making. We suggest that in their review of a failure to meet the Solvency Test, courts ought to focus on the decision-making process of the directors, rather than criticize in hindsight the contents and merits of the distribution decision. This standard of judicial review is based on similar justifications to those underlying the Business Judgement Rule (BJR) and shares with the BJR similar scope and contours.