Dear Clients and Friends,
We would like to bring to your attention new important regulatory developments in Israeli companies’ regulations regarding Israeli public companies traded outside of Israel, having an immediate effect on all relevant companies.
Today marks the commencement of the 10th amendment to the Companies Regulations (Reliefs for Companies Whose Securities are Listed for Trading Outside of Israel) (amendment) – 5784-2024 (the “Alleviation Regulations” and the “Amended Regulations”). This pivotal amendment is designed to ease the regulatory burden on Israeli companies listed for trading on certain foreign stock exchanges detailed in the Israeli Securities Law, including Israeli companies that are only listed for trading such foreign stock exchanges (each, an “Abroad Company”) and Israeli companies that are dually listed for trading on the Tel-Aviv Stock Exchange and such foreign stock exchanges (each, a “Dual-Listed Company”).
Key developments introduced by the Amended Regulations include:
- hareholders’ Meetings Proxy Cards: The modification of Regulation 3 in the Amended Regulations aims to exempt Abroad Companies and Dual-Listed Companies from the requirements set forth in Sections 87(b) and 89 of the Israeli Companies Law – 5759-1999 (the “Companies Law”). This exemption pertains to cases where said companies issue proxy cards that permit shareholders to vote in accordance with the laws of the country where they are listed for trading e.g., in accordance with U.S or other applicable foreign securities laws and the relevant stock exchange rules and regulations (collectively referred to as “Foreign Law”).
- Notification of Personal Interest in Voting Cards: Regulation 3a of the Amended Regulations revises the procedure for shareholders to notify the company of the existence or absence of a personal interest concerning an agenda item at a shareholders’ meeting. A company shall be entitled to draft the proxy card to expressly state that by submitting the card to the Company, the shareholder affirms having no personal interest. A shareholder having a personal interest should separately and independently advise the company on the existence of such interest.
- Material Private Offerings: the provisions of the Companies Law concerning a material private offering (as such term is defined in the Companies Law) will not apply to Dual Listed Companies and Abroad Companies, but rather such material private offerings will be governed by the Foreign Law. To clarify, this is not necessarily a relief but rather an alignment among the relevant companies, that will be required to follow the applicable Foreign Law.
- General Meeting Record Date: the maximum date by which the record date can be determined for a specific general meeting has been extended from 45 to 60 days.
- Increased Threshold for Shareholder Actions: The Amended Regulations raise the shareholder holdings’ threshold required for certain actions:
- The holding threshold of a shareholder to have the right to demand the Board of Directors to convene a special general meeting of the company’s shareholders, was increased and basically doubled; a shareholder now needs to hold a minimum of (i) 10% of the company’s issued share capital (rather than 5% of the company’s issued share capital, as set forth in the Companies Law prior to the enactment of the Amended Regulations) and 1% of the its voting rights, or (ii) 10% of the company’s voting rights (rather than 5% of the company’s voting rights, as set forth in the Companies Law prior to the enactment of the Amended Regulations).
- The holding threshold of a shareholder to request the addition of an item concerning the appointment or removal of directors from office to the agenda for a special general meeting of a company’s shareholders, was increased dramatically from the previous 1% threshold, and now a shareholder must hold at least (i) 5% of the issued share capital (rather than 1% of the company’s issued share capital, as set forth in the Companies Law prior to the enactment of the Amended Regulations) and 1% of the voting rights, or (ii) 5% of the voting rights. This amended threshold shall apply unless the Foreign Law specifies a lower threshold, in which case, the 1% threshold shall be the effective threshold.
- Share Buyback Procedure: Regulation 7c of the Amended Regulations relieves Abroad Companies and Dual-Listed Companies from the requirement to meet the “Profit Test” (as defined in the Companies Law)[1] in connection with share buyback, subject to : (i) the company meeting the “Solvency Test” (as defined in the Companies Law), (ii) the company notifying certain creditors about the share buyback within three days of the relevant Board decision to resolution (the notice should state that the company decided on a distribution that does not meet the Profit Test), (iii) the company publishing the Board decision and a notice to the company’s creditors on the company’s website on the date on which the notice specified in section (ii) above was delivered, and (iv)enabling a 30-day period for creditor objections for such buybacks.
- Reporting Obligations: An Abroad Company will be required to update its records maintained with the Israeli Registrar of Companies with respect to the name of the stock exchange on which its securities are listed for trading and its board composition (including ongoing updates on personnel changes).
- We hope you find this information useful in navigating the complexities of compliance with Israeli laws and regulations as they relate to your Israeli companies listed outside of Israel. Should you have any questions or require further assistance, please do not hesitate to contact us.
Click here for the copy of the Amended Rule.
We would be happy to assist you with any questions or clarifications you may have with respect to this Client Update.
Shibolet & Co. Law Firm
This update is provided as general information only and may not be relied upon in any individual case without additional legal advice.
[1] A “material private offering” under the Companies Law is either (a) an offer that grants twenty percent or more of the voting rights in the company before the issuance, where the consideration, in whole or in part, is not in cash or in securities that are listed for trading, or that is not on market terms, and as a result of which the holdings of a “substantial shareholder” (as defined in the Companies Law) in the company’s securities will increase, or as a result of which a person will become a “substantial shareholder”, or (b) as a result of which a person will become a “controlling shareholder” (as defined in the Companies Law) in the company
