The battle over the Ashdod oil refinery reaches the court: a shareholder demands to disclose the agreements with Shapir

A shareholder in the Ashdod oil refinery turned today, Wednesday, to the Tel Aviv District Court with a request to receive documents concerning the relationship between the company and Shapir Engineering. The request is a preliminary step towards the possibility of filing a derivative lawsuit against the company and its nine board members, on the grounds that they allowed Shapir to accumulate broad influence over the management of the oil refinery even though it currently holds only about 10% of the shares.

At the center of the request is Shapir's consulting agreement with the company, which was recently extended for three additional years, alongside other agreements that grant it options to increase its holding in the future up to 65%. The request, filed through the Ronen Adini & Co. law firm, seeks to disclose the full terms of the consulting agreement as well as a series of additional documents: the investment agreement, the option agreements, the lease agreement for about 43 dunams of the company's real estate, and the minutes of the board of directors and its committees.

According to the plaintiff, Shapir acts in practice as a controlling shareholder in the company — far beyond its formal status as a business "consultant". The request refers to the fact that Shapir appointed a director on its behalf and was granted "consulting" powers that encompass almost every material area of the company's activity. It emphasizes that Shapir is in a built-in conflict of interest: as long as it has not exercised the options in its possession, it has an interest in suppressing the share value and the company's activity, since a rise in the rate will make the exercise price more expensive for it, i.e., the price of obtaining control.

The request also relies on the resignation of former director Shimon Gal, who raised claims regarding unusual involvement of Shapir in the appointment of the CEO and in the executive committee, and on an opinion published at the end of July by the Committee for the Reduction of Concentration, which determined by a majority of votes that Shapir should not be allowed to obtain control of the company for reasons of concentration in the energy sector.

The plaintiff claims that the board of directors and the audit committee approved the extension of the consulting agreement just a few days after the publication of the opinion, and without the matter being brought for approval by the shareholders' meeting — contrary to the duty applicable to transactions with a controlling shareholder. The applicant claims that by doing so, the company's directors granted actual control of the company to Shapir "on a silver platter," without it having to purchase the controlling shares and without paying the price of the controlling shares. In doing so, the directors breached the duties of care and loyalty imposed on them.

The applicant claims that the disclosure of the documents is essential for examining the possibility of filing a derivative lawsuit on behalf of the company against the office holders. It is further claimed in the request that the approval of the extension by the board of directors and the audit committee was not published in an immediate report and became known to the public only in the quarterly report published the day after its approval.