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Corporate Law

Can shareholders of an Israeli private company remove a director without cause?

Yes. Section 66 of the Companies Law 5759-1999 grants the general meeting of shareholders the power to remove a director at any time by ordinary resolution — a simple majority of votes cast — without needing to state a reason. This statutory right cannot be excluded by the company's articles of association (takanon). The director is entitled to prior notice and the right to submit written objections to shareholders before the vote, but has no right of appeal or reinstatement. The removal must be reported to the Registrar of Companies within 14 days.

Section 66 of the Companies Law 5759-1999 establishes the general meeting's overriding power to remove directors and reflects the Israeli legislature's view that shareholders must retain ultimate control over board composition at all times. The company's articles cannot eliminate this right, though they may impose procedural requirements such as a minimum notice period for the general meeting or a specific quorum threshold for the vote. Shareholder agreements in foreign-owned Israeli subsidiaries frequently grant the foreign parent the exclusive right to appoint — and by implication protect — "its" director, but these contractual protections operate at the shareholders' agreement level and do not override the statutory removal power. A removed director who believes the removal violated a shareholders' agreement may have a contractual claim, but the board seat itself cannot be recovered through that claim alone. For a full overview of director obligations and removal, see the guide on directors and corporate governance in Israel.

Removing a director who is also a company employee requires attention to two separate legal tracks: the corporate removal under Section 66 terminates the directorship, but the employment relationship is governed by the Severance Pay Law 5723-1963 and the Notice to Employee Law 5761-2001. Depending on the circumstances, the removed director-employee may be entitled to severance pay, notice pay, and other statutory entitlements. Foreign-owned Israeli subsidiaries often fail to distinguish between these two tracks, treating the board resolution as terminating both the directorship and the employment simultaneously without following proper labor law procedure. Additionally, a director who is a signatory on the company's bank accounts, registered with the Tax Authority, or listed with the VAT registrar must be replaced in all those registrations before the removal takes full practical effect.

⚖ In Practice
  • Governing law: Section 66, Companies Law 5759-1999
  • Competent authority: no government approval required — removal takes effect at the general meeting and must then be reported to the Registrar of Companies (Rasham HaCevara)
  • Required majority: ordinary resolution — simple majority of votes cast at a quorate general meeting
  • Director's right: prior written notice; opportunity to submit written objections to shareholders before the vote; no right of reinstatement
  • Post-removal filing: Form 15 (Director Cessation) must be filed with the Registrar of Companies within 14 days of the resolution

From the full guide: Directors and Corporate Governance in Israel

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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