The Jerusalem District Court rejected the request of 9 creditors to appoint an investigator to examine the conduct of the industrial brothers Shraga and Yariv Brosh and company officers after the collapse of the companies. At the same time, it was determined that if an arrangement is not formed during the delay period for 60 days, it will be possible to move to a route that will allow an examination of the circumstances of the companies’ collapse.
About a month ago, a stay of proceedings was issued for companies owned by the Brosh brothers, and the director of the settlement was appointed – Adv. Tzuriel Lavi from Lipa Meir’s firm. The banking system stands at NIS 185 million. a million shekels.
Following the delay in the proceedings, 9 creditors, suppliers of the companies, submitted an application to appoint an investigator to examine where the companies’ money went and how the companies got into huge debts of about NIS 250 million, as well as to locate assets of the company and controlling shareholders.
Judge Avigdor Dorot rejected the request and ruled that the role of the director of the arrangement is to ensure the proper management of the company, and there is no room to give him investigative powers or another official to investigate past events.
Creditors: “Bad conduct”
The creditors claimed that there was a suspicion “of unscrupulous conduct on the part of the controlling shareholders”, and that “only the appointment of a professional investigator with experience in the field of investigations will be able to provide an appropriate response to the required inspections.”
It was further argued that at the end of the day the companies would be sold “lentil stew”, and that the appointment of a researcher would allow the companies’ conduct to be examined prior to their collapse.
The Insolvency Commissioner argued that procedurally it is not possible to grant the director of the arrangement under the procedure investigative powers to examine past events and the conduct of the controlling shareholders in relation to the period prior to the opening of the proceedings.
Advocate Roi Aharoni, representing two of the creditors, a businessman from Hebron and a Jordanian company, said that “unfortunately for the creditors, the court did not find it appropriate to appoint an independent external investigator to examine the suspicions and information held by the creditors. The commissioner who chose to oppose the appointment of the investigator for procedural reasons and to ignore the public interest in this case. ” Adv. Aharoni added that “the creditors are examining additional options available to them in the context of the information and materials held by them.”
The judge noted that the controlling shareholders were required to file detailed affidavits regarding their assets and liabilities from 2018, and thus there is “some response to the need raised regarding the receipt of additional information in relation to locating the controlling shareholders’ funds”.
Flow crisis following the corona
According to the Brosh brothers, through attorneys Adi Braunstein and Gil Hirschman, the sharp drop in revenue was caused as a result of the Corona crisis and led the group to an acute cash flow crisis. Although the owners of the company poured huge sums into the group, it was unable to overcome the cash flow crisis. It was claimed that the effect of the epidemic was reflected in a drastic decrease in the company’s customer orders in Israel and abroad, after the carpet manufacturing plants in North America were completely closed for a period of 3 months.
The debt to creditors in Din Kadima is NIS 9.35 million, to employees – NIS 7.3 million, to the Tax Authority and the National Insurance Institute – about NIS 1.55 million, to property taxes – half a million shekels. The unsecured oblivion with a personal guarantee stands at NIS 204 million before the realization of the collateral. The debt to the unsecured creditors is about NIS 34 million.
The Cypress Group is engaged in the field of the plastics industry and in particular the production of synthetic yarns used mainly in the carpet industry. The group employs 125 workers, most of them in production positions. The chairman of the board is Shraga Brosh, who served as chairman of the Israel Export Institute and as president of the Manufacturers’ Association. The group’s CEO is Yariv Brosh, who served as chairman of the Metal Association in the Manufacturers ‘Association and as a member of the Manufacturers’ Association’s Finance Committee.
The court last approved the director of the arrangement to invite proposals for the acquisition of the company’s activities, alongside the Tene Fund, which was presented as a potential buyer and formed the basis for delaying the proceedings for the companies.
CAD 26881-12-21