Client updates / Capital Markets

Recently, after initial approval by the Finance Committee, the Knesset has passed a temporary order to the Income Tax Law with regards to deduction of issue expenses. According to the law, the expenses related to issuing the shares of companies and partnership participation units on the Tel Aviv Stock Exchange (TASE) will now be recognized as expenses for tax purposes. 

While some uncertainty exists with regard to the regulatory regime that applies to public offerings of digital coins (ICOs), in the area of services related to digital currencies, regulations are expected to come into effect on June 1, 2018, within the scope of the Control of Financial Services Law.

In 2017, the Israel Tax Authority published a circular addressing the use of accumulated balances in central severance pay funds, and many employers began liquidating these severance pay funds. It is important to note that the liquidation of a central severance pay fund also has implications on labor relations with your employees.

Recently a new Amendment to the Securities Law, concerning the restructuring of the stock exchange, came into effect.

It is not uncommon for Israeli incorporated companies to seek investments abroad. In many cases, such investments are done through public offerings on international stock exchanges. Securities issued by Israeli companies are traded on the NASDAQ, the London Stock Exchange and a variety of other exchanges, including Australia. These situations, which make perfect sense from a business perspective, give rise to interesting and sometimes quite complex legal issues.

An amendment to the Securities Regulations (Periodic and Immediate Reports) was promulgated in March 2017, whereby small reporting corporations shall be able to publish their financial statements on a bi-annual basis, provided that they have not issued bonds that are being held by the public. In this regard, a “small corporation” is defined in the said regulations.

A significant precedent was handed down recently by the Israeli Supreme Court on the subject of the judicial audit that should be performed in relation to companies’ business resolutions.

The judgment officially adopts the Business Judgment Rule prescribed in Israeli law with regard to the auditing standard that should be applied to board resolutions. The judgment further prescribes that it is also warranted to adopt the Enhanced Scrutiny Rule under circumstances when the Business Judgment Rule does not provide an adequate solution. The judgment also engages in subjects not yet addressed by the court, including issues pertaining to dividend distributions, leveraged buyouts, officers’ duties in a company and the relation between them.

Last week, the Israel Securities Authority published draft legislation for public comments that will permit corporations to obtain loans through crowdfunding with an exemption from the prospectus requirement.

In order to improve the Israeli partnership market and in order to bridge the wide gap that exists between partnership laws in Israel and the partnership laws in other countries, in December 2016, the Ministry of Justice published a draft Memorandum of Law – Partnerships.

On December 2016 for the first time in Israel, an Israeli company was convinced for bribing a foreign public official. This is especially interesting due to the fact that this is also the first time the general prosecution in Israel based an indictment on Section 291A of the Israeli Penal Law, that was enacted in 2008, in the course of Israel’s efforts to join the OECD as a member country.

About a year and a half ago a new regulatory regime regulating trading rings entered into force, requiring the operators of trading rings to obtain a regulatory license as a pre-condition to operating them, and prohibiting the operation of a trading ring without such a license.  

A number of legislative amendments relating to the capital market have been promulgated recently, including

As part of the Israel Security Authority’s (ISA) measures to relax certain existing regulations, it has promulgated the Securities Order (Amendment to the First Addendum to the Law) regarding the definition of a “classified investor.” This amendment will come into effect on March 25, 2016.

As part of the globalization of the Israeli capital market, the Financial Committee of the Israeli Knesset recently approved the Joint Investment Trust Regulations (Offer of Units of a Foreign Fund), according to which managers of foreign mutual funds may offer their funds to the Israeli public.

The social phenomena of crowdfunding, adopted by high-tech startups as an alternative means to raise funds, was previously limited in Israel by Israel’s Securities Law. Section 15 of the law dictates that any offer or sale of shares to the public (i.e. to more than 35 potential investors) requires the issuance of a prospectus approved by the Securities Authority; a timely and costly endeavor, rendering crowdfunding prohibitive in Israel.

The Economics Department of the Tel-Aviv – Jaffa District Court is continuing to issue precedent rulings, and this time, in relation to the interpretation of section 46.B. of the Securities Law, 5728 – 1968.

Discussions had been underway for some time between Mylan N.V., a foreign public company traded on the NASDAQ, and Perrigo Company Plc., a foreign company traded on the New York Stock Exchange and on the Tel-Aviv Stock Exchange, relating to Mylan’s potential acquisition of Perrigo’s shares. After these discussions failed to mature into a transaction, Mylan announced in the United States its firm intention of publishing a tender offer for Perrigo’s shares, despite the fact that Perrigo’s board of directors had rejected the offer (i.e., a hostile takeover).

Recently, the Supreme Court handed down a ruling that constitutes a precedent: loan agreements which an entrepreneur offered to public investors are tantamount to “securities,” and therefore, require the publication of a prospectus, pursuant to the provisions of the Securities Law.

As part of the series of reliefs that the Israel Securities Authority is promoting in order to ease the regulatory burden applied to entities under its supervision, a number of amendments to the Securities Regulations (Periodic and Immediate Reports), 5730 – 1970  were promulgated in the Official Gazette recently.

As part of its endeavor to streamline public reporting and ease some of the regulatory burden imposed on publicly listed companies, the Israeli Securities Authority (ISA) this week introduced an amendment to the Securities Regulations governing periodic and immediate reports. The amendment deals with a number of issues, including reporting on agreement negotiations and the companies’ right to delay public reporting.