Redomiciling an Israeli Public Company to Delaware
On April 12, 2019, Arcturus Therapeutics Ltd. (formerly Alcobra Ltd.), an Israeli public company traded on NASDAQ, published in the United States a prospectus and proxy statement (convening a general meeting of shareholders of the company).
Publishing the prospectus is an advanced step toward completing an arrangement between the company and its shareholders pursuant to sections 350 and 351 of the Israeli Companies Law. The convening of a general meeting was ordered by the Tel Aviv-Jaffa District Court as part of this process.
The arrangement is, in essence, a reorganization proceeding and its goals are to redomicile the company and transfer the corporate regime applicable to the company from the Israeli Companies Law to the corporate laws of Delaware, United States. The company’s desire to redomicile, which is also known as a “corporate inversion,” derives from the fact that, aside from its historical incorporation in Israel, it no longer has any links to Israel. About a year and a half ago, at the end of 2017, the company (which at that time was a shelf corporation without any activity) completed a merger transaction, in which it acquired the assets of Arcturus Therapeutics Inc. of San Diego, California. Once the merger was complete, the company’s essence changed, since the vast majority of its shareholders are not Israeli; it is traded on an American stock exchange and is subject to the securities laws of the United States; and all of its managers, employees, and operations are located in the United States.
However, even though the company essentially became a US company, for all intents and purposes, it remained subject to the provisions of the Israeli Companies Law because it was incorporated in Israel. The problems posed by this situation came to a head last year when a battle for control of the company erupted among the members of its board of directors. This obliged the warring directors, all of whom are American, to conduct litigation before an Israeli court. As a result, once the control challenge was settled, the company’s board of directors sought ways to enable the public company to redomicile from Israel to the United States.
To carry out the redomiciliation, the company filed an application for approval of an arrangement between it and its shareholders pursuant to the Israeli Companies Law, employing the judicial mechanism typically used to obtain a stay of proceedings as part of insolvency proceedings. The arrangement includes an exchange of all of the company’s shares for shares of a new US company. Upon completion of the arrangement proceedings, the public will hold shares of a new company incorporated in Delaware and traded on NASDAQ. This new company will hold all of the old company’s shares, which will have become a private company.
As part of the arrangement proceedings, the Tel Aviv-Jaffa District Court ordered the convening of a general meeting. Shareholders were informed by way of a prospectus, as required by US securities laws.