Under Israeli law, directors have various sources of responsibility that may lead to liability.
The various sources can be caricaturised in general by three main categories:
- the duty of loyalty and good faith to the company and shareholders as a whole;
- the duty of care and diligence, and;
- the recently further elaborated duty to know and act accordingly.
More particularly, the sources of law are various and vary from the Israeli corporate laws (sections 252-256 of The Companies Law 5759-1999"), Securities laws, tort laws, environment laws and regulations, fundamental Principles of law such as Good Faith and more.
Moreover, throughout the years, case law has been applying the principle of the Business Judgment Rule in order to determine whether the conduct of the director, was reasonable in line with the director's duties to the company and shareholders as a whole and in an adequate manner as expected from directors.
The Companies law provides that any breach of the directors obligations and duties may provide cause for a lawsuit similar to a breach of contract, in addition to any other sources of law.