Tel Aviv Court Strips Shareholder Veto in Aviron Industries Corporate Dispute
The Tel Aviv District Court stripped a major shareholder of veto power in a dispute at Aviron Industries, appointing an external director to break a corporate deadlock.
In a highly unusual ruling, the Tel Aviv District Court stripped a shareholder of their veto power last week amid an ongoing governance dispute at Aviron Industries Ltd. The dramatic decision came during the second round of control battles within a year at the public company, where controlling shareholder Shapir Engineering (holding 55% of the shares) and significant shareholder Gabriel Maguzi (holding another 28% through Maguzi Industries) are locked in fierce opposition.
The two sides found themselves deadlocked, with each possessing veto power over the appointment of an external director and both utilizing that power to block the other's candidates. This impasse paralyzed the company's management processes.
Court Intervention and Judicial Precedent
To rescue the company from a paralysis that was severely harming its business operations, the court took the extraordinary step of appointing former Member of Knesset Ayelet Nahmias-Verbin as an external director while invalidating Maguzi's voting rights. The court reasoned that when one party is determined—despite the duty of fairness incumbent upon them—to ensure that their favored candidate is elected, "there is no way out," necessitating an alternative mechanism.
This is not the first time the parties' disagreements have reached the courtroom. In September 2025, a similar battle erupted over another external director appointment, with each side clinging to its veto. Failed attempts to appoint a director prompted Aviron to approach the court for the first time, arguing that Maguzi's opposition was consistent, baseless, and that his votes should not be counted among neutral voters due to his adversarial stance against Shapir.
The Legal Dilemma of Veto Power
Public companies are legally required to have at least two external directors. This is not a mere technicality; critical corporate committees, such as the audit committee, cannot convene without them. Consequently, appointing external directors has an immediate and tangible impact on a company's ability to function and make decisions.
Law requires that a first-term director (spanning three years) must secure a majority vote at the general meeting from a specific group defined as "neutral shareholders"—those who are neither controlling shareholders nor affiliated with them. Originally designed to protect minority shareholders by giving them decisive leverage, the mechanism prevents controlling owners from unilaterally imposing compliant directors.
"When there is a potential breach of the duty of fairness by either party holding decisive power, one must turn to an alternative mechanism to balance the competing forces," the court noted in its ruling.
Legal experts point out that while courts are generally reluctant to substitute for the legislature, severe corporate stalemates occasionally demand judicial intervention to preserve operational integrity.
Reactions and Legal Outlook
Aviron Industries welcomed the decision, stating that the court's ruling speaks for itself and underscores the critical importance of corporate governance and lawful board appointments. Meanwhile, Gabriel Maguzi strongly condemned the verdict, calling it a neutralization of a 28% stakeholder's voice in a vote specifically designed to protect minority rights, and announced plans to appeal the decision.
