Recently, Judge Ruth Ronen of the Economic Department of the Tel-Aviv District Court handed down a ruling which related to an issue which is pertinent to virtually every publicly listed company.   When do negotiations reach a point of becoming material information, thereby constituting inside information? The background to this case was that Africa Israel Industries had published a tender offer in 2012 for the purchase of shares in Negev Ceramics, without publicly disclosing that negotiations were being conducted with Olympia, a Canadian company. The Administration Enforcement Committee (established under the Securities Law) had ruled that the publishing of the tender coupled with lack of disclosure constituted insider information. Judge Ronen presided over the appeal against this ruling.   Judge Ronen ruled that the negotiations had indeed reached the point of becoming material information. Her decision was based on the application of the materiality/magnitude test, which weights the probability of the event occurring against the anticipated impact of the event on the company. It is not difficult to see the logic in the assumption that the fact that negotiations are underway might be material information and that therefore, whoever executes transactions with securities while in possession of such information is considered as having made use of insider information. However, it appears that the ISA’s Administrative Enforcement Committee was prepared to go even further and expressed the opinion that the same materiality test for the purpose of ascertaining abuse of insider information should be used for the purpose of ascertaining the application of a reporting obligation. The Committee’s position may be interpreted as deciding that, when negotiations reach the point of becoming material, the Company must issue an appropriate immediate report. Judge Ronen decided that it was unwarranted to examine the correlation between abuse of insider information and a corporation’s general disclosure obligation, within the scope of the petition. However, the critical question remains: Should every public company assume that it is obliged to publish an immediate report every time it conducts negotiations and they reach the level of becoming “material”? Firstly, one must consider whether such a requirement is reasonable and feasible. One must keep in mind two salient points: There is never certainty that negotiations, whether or not material, will eventually lead to an agreement and; the very disclosure that negotiations are underway could thwart the transaction or adversely affect its conditions. Secondly, since negotiations are often a dynamic, lengthy process, it is unreasonable to expect public companies to repetitively perform analyses during the course of negotiations in order to ascertain whether, at any given stage, the correlation between the probability of a successful conclusion of the negotiations and the anticipated impact of the current draft of the agreement, has reached a level of “materiality” that dictates the publication of an immediate report. Even if the conclusion had been that it would be advisable and wise to oblige public companies to publish immediate reports about negotiations, considering the implications and possible repercussions, such an obligation should be clearly and unequivocally defined. For example, the Securities Law prescribes specific provisions regarding insider information. Furthermore, the Securities Regulations include express provisions regarding the imposition of reporting obligations, and require the reporting of any transaction for the purchase of a “material asset.” The Regulations enable the company’s board of directors to delay the reporting under particular circumstances, but do not allow a company to delay reporting in any instance of securities being offered pursuant to a prospectus. In other words, there are circumstances when information about material negotiations must be published: before the execution of a transaction with securities, before the publishing of a tender offer and before the publication of a prospectus, and in relation to purchases of material assets. However, one should not deduce from this that there is a sweeping obligation to publish an immediate report about negotiations, and certainly, it would be advisable to carefully analyze all relevant considerations, such as reasonability and the appropriate legal source before imposing such an obligation.

The Israel Immigration Authority recently published a new, experimental, streamlined procedure for issuance of work visas for foreign experts, allowing the holder to work in Israel for up to 30 days over a 12 month period. Previously, multinational companies that wished to send professionals to Israel to work with their Israeli RD centers or strategic partners for short periods of time were required to apply for and obtain a work permit (from the Ministry of Economy) and then a work visa at an Israeli consulate abroad, all before entering Israel. Under the new procedure, application for a work permit for an expert employee will be expedited, with full processing completed within 6 days in most cases.  Once the work permit is granted, the expert may enter Israel as a tourist, provided that he or she reports to the Immigration Authority within two business days of arrival, where the tourist visa will be converted to a work visa. This new process should lessen the burden on multinationals or non-Israeli acquirers that require their expert employees to supervise operations in Israel, and it allows these companies to send their experts to Israel on an urgent basis.

Amendment no. 14 to the Non-Profit Organizations (Amutot) Law, came into effect in February, 2015.The purpose of the Amendment is to hone the rules of corporate governance that apply to amutot and includes provisions designed to strengthen the nature of the audit in amutot, increasing transparency and strengthening the oversight and investigation authorities of the Registrar of Amutot. The Amendment sets out provisions for the following issues: mandatory appointment of an internal auditor for an Amutah; expansion of the authorities of the Audit Committee (or the Audit Body of an amutah, as the case may be); granting oversight authorities and certification of supervisors by the Registrar of Amutot; expansion of the oversight authorities of the Registrar of Amutot through the use of external inspectors; expansion of the oversight authorities of the Registrar of Amutot regarding independent investigation of an amutah (and without the appointment of an external investigator); and various general provisions in a number of areas related to the relationship between the Registrar of Amutot and the amutot, and between the amutot themselves. One of the main changes in the Amendment relates to a new entity in an amutah - the internal auditor. An amutah with a turnover exceeding NIS 10 million (or exceeding a higher amount to be determined by the Minister of Justice) - must appoint an internal auditor (“Internal Auditor”) in addition to the existing internal auditing bodies that are stipulated in the Amutot Law (Audit Committee, or the Audit Body as the case may be, and the Auditing Accountant). The Internal Auditor will report to the Audit Committee on all matters related to professional issues, and to the Executive Board of the amutah on hierarchical-organizational matters. The appointment of the Internal Auditor will be done by the Executive Board of the amutah with the approval of the Audit Committee, and in the event of a disagreement, the General Assembly will decide. Responsibilities of the Internal Auditor include, inter alia: (a) submitting a proposal for the annual or periodic work plan for the approval of the Executive Board, after the Audit Committee has examined it, and the Executive Board will approve it, with the changes it sees fit; (b) conducting an internal audit, in addition to the aforementioned work plan, on matters that may arise for urgent examination as imposed upon him by the Executive Board or the Audit Committee; (c) submitting a report on the findings as part of the annual and/or periodic work plan - to the Executive Board, CEO and the Audit Committee of the amutah.​Amendment No. 14 also includes provisions which expand the authorities of the Audit Committee (or the Audit Body of an amutah, as applicable). Such expansion includes identifying and fixing problems in the amutah’s business administration, inter alia, by consulting with the amutah’s Internal Auditor or with its accountant, and to make proposals to the Executive Board regarding ways of correcting such problems.Additionally, added to the authorities of the Audit Committee, is the authority to examine the internal auditing system, including the Internal Auditor’s work plan, the amutah’s accountant remuneration and also to make arrangements regarding the manner of handling complaints brought by amutah employees regarding flaws in the conduct of its business and regarding the protection that will be provided to employees who complain, as aforementioned. 

The recent decision of the Antitrust Commissioner with regard to the existence of a natural gas monopoly illustrates all the more emphatically the absence of an orderly legislative framework to regulate all matters pertaining to oil and gas exploration and production in Israel. Nevertheless, moves are being made to clarify the regulatory framework concerning off shore Oil Gas. A few weeks beforethe Commissioner’s decision,  the government had submitted a draft bill to the knesset on the matter of Israel's maritime zones. The draft bill is worded in a way that adopts the customary provisions of the international Convention of the Law of the Sea of 1982, even though the State of Israel is not one of its signatories. The draft bill defines five maritime zones, including the exclusive economic zone of the State of Israel. Besides defining the boundaries of the exclusive economic zone, the draft bill also prescribes the State’s powers and authorities and the laws that shall apply to that zone. The adoption of the draft bill by the knesset will create certainty and reduce the ambiguity surrounding all issues pertaining to oil and gas exploration, production, utilization and management in Israel’s economic waters. and should encourage foreign companies to consider entry into the Israeli market.