A special administrator appointed as part of a process to rehabilitate an association due to irregularities demanded that office holders in the association return funds they received as salaries because these were not approved by the association’s institutions and exceed what is permitted by law.
The court ordered the members of the association’s board to return most of the funds. An association is a corporation that does not aim to distribute profits and whose primary purpose is not to make profits, and therefore Israeli law prohibits the distribution of the association’s profits to the association’s members. In addition, the law imposes on office holders in the association a duty to act in the interest of the association within the framework of its goals and prohibits an office holder from receiving salary except with the approval of the association’s institutions and in accordance with the restrictions set forth in the law regarding salary and terms of employment. Here, the members of the board acted against the interests of the association when they caused its profits to be transferred to them under the guise of salaries to which they were not entitled, because they were not legally approved and in contradiction to the restrictions set forth in the law. Therefore, they were required to return all of the funds that were given in violation of the law.
Read the ruling Chapter (Y-M) 1363-03-18 Talmud Torah HaClali Association and Yeshiva Gedola Etz Chaim in Jerusalem (in liquidation) v. Yosef Tokczinsky
Published in Legal Channel 430 08.01.2025 Afik & Co. https://he.afiklaw.com/
