Dear Clients and Colleagues,

We wish to inform you that on March 12, 2024, an amendment to the Companies Regulations (Reliefs for Israeli Public Companies Listed on Stock Exchanges Outside of Israel) was published in the Official Gazette, which is intended to relax certain requirements currently applicable to Israeli companies, whose securities are traded on foreign stock exchanges, including dual-listed companies (companies with securities traded on both certain foreign stock exchanges and the Tel Aviv Stock Exchange).

The reliefs effected by the amendment include, amongst other things (i) modification of the rules applicable to the conditions a company must fulfil in order to  commence  a share buy-back, (ii) an increase in the minimum ownership percentage required for a shareholder to request to convene a general meeting of the shareholders (“General Meeting”) and to request to include on the agenda of a General Meeting the nomination, or removal, of a  board member, (iii) softening of the rules applicable to the procedure of notifying the company of the existence or absence of a personal interest in a voting card, (iv) reliefs regarding the date and manner of publication of a notice to hold a General Meeting, and the manner in which voting cards are prepared, and (v) reliefs regarding the determination of the record date for a shareholder’s eligibility to participate in a General Meeting.

As part of the amendment to the regulations, the following reliefs came into effect:

1. Increasing the minimum ownership percentage required for a shareholder to include on the agenda of a General Meeting the nomination, or removal, of a board member. The minimum ownership percentage required in order for a shareholder to include the nomination of a candidate to serve on the board of directors, on the General Meeting agenda (or to propose the removal of a candidate from serving on the board of directors), has been increased so that the minimum threshold is now 5% of the voting rights in the company, as opposed to the previous minimum threshold of 1% prescribed in the Companies Law, applicable to both foreign listed Israeli companies and dual-listed Israeli companies.
2. Increasing the minimum ownership percentage required for a shareholder to convene a special meeting of the shareholders. The minimum ownership percentage required for a shareholder to convene an special meeting has been raised from a minimum threshold of 5% of the issued and outstanding share capital and 1% of the voting rights in the company, or a threshold of 5% of the voting rights in the company, to a minimum threshold of 10% of the issued and outstanding share capital in the company and 1% of the voting rights in the company, or a minimum threshold of 10% of the voting rights in the company, both in foreign listed Israeli companies and in dual-listed Israeli companies (only applicable where the law of the foreign country, as it applies to domestic companies in that foreign jurisdiction, does not stipulate a minimum ownership percentage that is less than 10% in order to convene a shareholders’ meeting).
3. Distribution by way of share buy-back, without passing the profit test. The amendment enables foreign-traded Israeli companies and dual-listed Israeli companies to effect a dividend distribution, by way of share buy-back, which does not pass the profit test and without going to court. Nonetheless, the relief is subject to the fulfillment of a number of conditions: (a) the distribution meets the solvency test, (b) the company has notified its material creditors and secured creditors of its intention to make a distribution, (c) the notice was published on the company’s website, and (d) no objection has been filed with the court by a creditor. If an objection to the execution of the distribution is filed by any creditor, the company will be required to obtain approval from the court for the distribution.
4. Reporting Obligations. The reporting obligations of foreign-traded Israeli companies to the Israeli Registrar of Companies have been reduced. Thus, for example, such companies will not have to report changes to the articles of association, changes to the authorized share capital, allocation and transfer of shares, and will not have to file an annual report, with the Israeli Registrar of Companies.
5. Companies without a controlling shareholder. The current exemption was expanded so that pre-existing corporate governance reliefs that, prior to the amendment, solely applied to overseas companies without a controlling shareholder, traded on certain stock exchanges, now applies to companies traded on any stock exchange in the world. The amendment includes reliefs in relating to appointments required in both the company’s compensation and audit committees, as well as in relation to the appointment of external directors to the board of directors of the company.
6. The record date of a General Meeting. The relief relating to setting a record date in order to determine shareholder participation and voting in the General Meeting has been expanded, so as to enable the company to set a record date that falls up to sixty (60) days before the date of the General Meeting, as opposed to the previous maximum threshold of 40 days. In addition, the provision that stated that dual companies should publish the notice of the general before the record date, was abolished.
7. Tender offers. The exemption provided by the Companies Law relating to regulating the acquisition of control of a company through a special tender offer was expanded to apply to dual-listed Israeli companies, in addition to foreign-traded Israeli companies. Importantly, this relief only applies in circumstances where the law of the foreign country restricts the acquisition of control by a certain percentage of the company. Therefore, currently the latter relief does not apply to companies traded in the United States.
8. Voting Cards. Foreign-traded Israeli companies and dual-listed Israeli companies are exempt from the application of the provisions relating to voting cards and position notices, provided that they comply with the law of the foreign country, as it applies to domestic companies, regarding the preparation of voting cards and voting. It is clarified that the relief also applies to position statements.
9. Notification of the existence or absence of a personal interest. A provision has been added that allows shareholders of foreign-traded Israeli companies and dual-listed Israeli companies to declare the absence of personal interest by signing a ballot on which it will be explicitly stated that such signature constitutes a declaration that the shareholder has no personal interest. In addition, it will be possible to notify the company of the existence of a personal interest, without having to do so by way of voting card.
10. A material private placement. The exemption provided by Companies Law regarding approvals required for a material private placement has been expanded to apply to dual-listed Israeli companies, in addition to foreign-traded Israeli companies. At the same time, the exemption is conditioned on the company fulfilling the requirements under foreign law as it applies to domestic companies in that foreign jurisdiction (so that the company can choose which legal provisions to comply with in order to avoid a regulatory vacuum).
11. Independent directors. The exemption was expanded so that the reliefs applicable to the classification of a director as independent now apply to foreign-traded Israeli companies traded on any stock exchange in the world. Pursuant to this relief and under certain conditions, the company’s audit committee may consider an independent director as classified under the laws of the foreign country, as an independent director for the purposes of the Companies Law, as well.

Our firm has extensive expertise in securities law and corporate law, particularly in connection with ongoing support and advice to companies whose securities are traded on foreign stock exchanges. We will be happy to assist you with any issue in these areas, as well as any questions or clarifications.

Corporate and Securities Department

Herzog Fox & Neeman