Family battle erupts over control of $6.5 million security company
Two siblings are suing their younger sister and her husband, Silynx's CEO and controlling shareholder, for $5.7 million, alleging they were secretly stripped of much of their inheritance in the family business.
A family battle has erupted among shareholders of security equipment company Silynx Communications, with two siblings suing their younger sister and her husband, the company's controlling shareholder and CEO, over the alleged dilution of their inheritance in the business founded by their parents.
Ran and Nir Nir are seeking approximately NIS 17 million ($5.7 million) from their sister, Gal Nir, and her husband, Nir Klein, who owns 41.5% of Silynx and serves as its CEO. The brothers allege that the couple acted behind their backs to substantially reduce their stake in shares they inherited from their parents.
The claims are detailed in a lawsuit filed last week with the Central District Court in Lod. The plaintiffs are seeking various documents and have asked the court to appoint an investigator to examine what they allege were improper actions that deprived them of their rights in the family business.
Silynx develops and sells tactical in-ear communication systems and other communications accessories for military and security agencies. The company, which began trading on the New York Stock Exchange in October 2023, has a market capitalization of approximately $6.5 million, according to the company. It sells its products to security agencies in roughly 40 countries.
According to the lawsuit, the company was originally founded under the name SOS by the late Adi and Ruth Nir. In 2005, it changed its name to Silynx and was incorporated in the United States, while continuing to operate through additional companies.
In 2008, Silynx raised capital from Shamrock Holdings in exchange for 70% of the company. The remaining 30% stayed with the Nir family.
The lawsuit says that Nir Klein, who is married to the family's youngest daughter, Gal, later purchased Shamrock's stake for $250,000.
The 30% retained by the Nir parents was subsequently inherited equally by their three children under their parents' wills.
The dispute centers on what happened to those inherited interests in the years that followed.
According to the lawsuit, the parents' estate held approximately 30% of Silynx before a series of transactions and changes in ownership ahead of Silynx's 2023 public offering. By the time of the IPO, the estate's stake in the company had been reduced to approximately 6%, while Klein's stake had increased substantially.
Ran Nir claims that rights he inherited from his parents in the company founded by his father were converted without his knowledge or consent. According to the lawsuit, his interest in the parent company was diluted from approximately 24.5% to 1.47% in the shares of Silynx.
The plaintiffs allege that the process began in 2017.
"The plaintiffs discovered that in July 2017, sister Gal pretended to sign documents titled 'Change of Control' in Silynx in the name of the mother of the family, in order to transfer control to her husband, Nir Klein," the lawsuit alleges.
The brothers further claim that Gal and Klein "acted to transfer control to themselves" without informing them and in violation of an existing status quo agreement.
Klein has disputed the characterization of the transactions. According to correspondence attached to the lawsuit, he said that he paid for the shares that increased both his own stake and that of his wife.
According to his account, the consideration included injecting funds into the company as a safety net to ensure the repayment of its debts, deferring repayment of a $50,000 loan, waiving a salary of approximately NIS 360,000 ($120,000) and agreeing to receive a reduced salary between 2017 and 2024.
Klein said those arrangements amounted to approximately NIS 2.2 million ($733,000) in waived compensation.
The court will now be asked to examine the competing accounts of how ownership of the family business changed and whether the transactions that diluted the siblings' interests were valid.
Although the lawsuit is rooted in a dispute between family members, it is being heard by the Central District Court rather than the Family Court.
An earlier lawsuit filed by Ran Nir in the Family Court in Petah Tikva was dismissed on jurisdictional grounds.
Judge Shirley Shai ruled that the dispute did not fall within the Family Court's jurisdiction under the Habas precedent, which requires the family relationship to make a significant contribution to the formation of the legal cause of action.
"The dispute is first and foremost a business-corporate one," Shai wrote, concluding that the connection between the claim and the family dispute was too weak to give the Family Court jurisdiction.
Following that decision, the two older siblings turned to the Central District Court with their current lawsuit.
