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Danny Goldstein, who sold the controlling interest in Formula to the troubled Peled-Givony group; Azriel Feuchtwanger, who sold the group the controlling interest in Feuchtwanger Industries and Feuchtwanger Investments, and the owners of other companies that sold their holdings to the Peled-Givony group may be held liable for the damage that the sale has caused to minority shareholders.

According to law professor Joseph Gross, a 1984 ruling in which it was established that majority shareholders have fiduciary duties toward minority shareholders could prove relevant. But Gross noted that he was not familiar enough with the details of the current case to say whether the precedent was relevant to it.

CPA Boaz Yifat notes that Article 192 of Israel's corporate law stipulates that a shareholder must not act in any way that would unfairly disadvantage other shareholders. The 1984 decision addresses the issue in further detail, he said.

Forty years ago the owner of a small bank, which in an interesting coincidence was named Feuchtwanger (it is still unclear whether there is any connection with the companies that are part of the Peled-Givony group), sold his holdings. But the buyers did not have enough equity to pay, so once the transaction was completed they used the bank's assets to repay the loan they had taken in order to buy it.

Eventually, Feuchtwanger Bank collapsed, the buyers were sent to prison and, after compensating the bank's clients for their losses, the Bank of Israel sued the original owner for damages. The Bank of Israel maintained that the majority shareholder thad a duty to verify the financial stability of the buyers and to realize that their plan was to finance the deal with the bank's equity.

The freedom of property owners to do with their property as they please must not be abused, Supreme Court Justice (now Chief Justice) Aharon Barak explained in that case. "A shareholder may not sell his stock to a buyer knowing that the latter would take over the company, abuse it and cause its destruction," Barak said.

A controlling shareholder must compensate the firm for all the money that it lost because he had breached his fiduciary duty, Barak wrote. "This remedy includes, first and foremost, money that the shareholder himself had gained from the deal, but also money that was received by third parties, whether this money was expended in the financing of the transaction or as a foreseeable consequence."

Azriel Feuchtwanger told Ha'aretz a few days ago that as far as he knew, majority shareholders do not have fiduciary duties toward other shareholders. He nevertheless noted that when he sold his stock he believed the transaction would enable a beneficial merger with other companies in the Peled-Givony group.

Goldstein does not refute the existence of a fiduciary duty. This is why his agreement with Peled-Givony left him as chairman for another three years, and provided him the option to repurchase the stock, he explained. Goldstein sold the group 17 percent in Formula for $68 million; while most of the transaction was canceled and the stock returned, Goldstein was not required to give back the money.