Court Rules: Despite Substantial Defects, the Amutah will not be liquidated

The Tel Aviv District Court ruled not to dissolve the “New Family” Amutah, despite substantial deficiencies found in its conduct. In doing so, the court accepted the agreement reached between the Registrar of Amutot and the amutah.

New Family amutah advocates recognizing alternative families, by providing legal services and issuing “Domestic Union certificates”. These, according to the amutah, grant their holders equal rights to married couples.

The Registrar of Amutot’s audit of amutah’s activity detected substantial defects in the amutah’s overall conduct. and specifically with the CEO’s actions. The main defects that arose concerned New Family’s contract with a company owned by the CEO and the CEO’s relatives, and the exaggerated wages paid to the CEO.

According to the Registrar, the amutah entered into these contracts without an orderly selection process, while paying usage fees for the domestic union certificates to a company owned by the CEO and purchasing advertising services from a company partially owned by the CEO’s brother, without examining possible alternatives. The amutah also classified the legal services it provided as donations instead of attorney’s fees in the financial reports to the Registrar of Amutot. Hence, the audit determined adequate supervision of decision-making was lacking in the contracts made on behalf of the amutah’s institutions.

In this case, the CEO (one of New Family’s founders) also oversaw all financial and operational powers. This raised substantial concerns about unlawful distributions of profits to the CEO and utilization of the amutah’s tax benefits (as a nonprofit) to evade taxes.

A Compromise in the Public’s Best Interest

Despite the defects found in the audit, defects that considered “very severe,” the amutah’s representatives and the Registrar of Amutot reached a settlement, to avoid New Family’s dissolution. The Registrar of Amutot agreed to a settlement because it determined that issuing a dissolution order for the amutah would affect a large community of people that require its services. Accordingly, the purpose of the settlement is to ensure compliance with the legal requirements for amutot, give expression to the CEO’s donation to the amutah, and lower the services’ costs.

Within the settlement reached (as certified by the court), the CEO will repay the amutah ILS 2 million she received from it as compensation for her services. The CEO also agreed to cancel the consideration payment for domestic union certificates and committed to exclusivity in their use. Furthermore, the CEO agreed not to compete against the amutah as long as she is an officer and/or an employee of it, with all this implies.

In addition, the amutah capped the CEO’s salary so it does not exceed 5% of the amutah’s turnover annually. It also clarified that it will classify all profits from the legal services the amutah provides as attorney’s fees, and not as donations.

Ultimately, the conditions of the settlement helped to overturn the amutah’s dissolution process.

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Adv. Sagi Gross is a partner in our Corporate department, leading the NPO sector.