Disclosure Obligations of Israeli Companies Listed on a U.S. Stock Exchange with Respect to the War in Israel
16 October 2023
Several clients listed on a U.S. stock exchange have inquired about their disclosure obligations with respect to the ongoing war in Israel, and specifically whether they are required to file or otherwise should file an immediate report on Form 6-K regarding the effects of the war on their business operations and financial results.
As of the date hereof, several Israeli companies have filed such reports with the U.S. Securities and Exchange Commission describing the material effects of the war, or lack thereof: one company disclosed that construction work has been halted on one of its sites, and several others disclosed that the war has so far had no material effect on their operations.
Our recommendation for Israeli companies listed on a U.S. stock exchange is as follows: First, to the extent not yet completed, management should thoroughly evaluate how the war has affected or may potentially affect the company’s business operations and financial results. Second, companies should consider filing an immediate report in one of the following two circumstances:
- In the event that the war has or, based on the management’s assessment, is expected to have a material effect on the company, its business operations or financial results, there is an obligation to disclose such effects. This is especially true if the war is expected to impact the company disproportionally compared to other Israeli companies. For example this might be the case if the company suffers from closure of worksites, if a large percentage of its management or key personnel have been called for military reserve duty, if there is a material stoppage in manufacturing or sales, a loss of investments or exposure to fluctuations in foreign exchange rates. In such case, we recommend clear and concise disclosure specifying to the extent possible the expected impact on the company, both qualitatively and quantitatively, mitigation measures taken or under consideration and the expected duration of such impact.
- Alternatively, in the event that the company wishes to reassure its shareholders, business partners, customers, vendors and others that its operations are expected to continue uninterrupted, the company may file an immediate report stating that at this time the company does not expect the war to have a material adverse effect on its business operations or financial results.
It is important to emphasize in such reports that the situation in Israel is very dynamic and could change quickly. The company should continue to evaluate the situation and its potential impact from time to time and provide an updated immediate report, as necessary. We also recommend including in such disclosure cautionary language regarding forward-looking statements.
The Herzog team is available for any questions or clarifications.
Hoping for more peaceful days.