practical matters for israeli companies listing in london · • dual-listing process for companies...
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Practical Matters for Israeli Companies Listing in London May 28, 2014
• Israeli Statutory Framework
• Israeli Companies Law Issues
• Israeli Issues – Dual Listing on Main Market
• Preemption Rights
• Tender Offer
• Relationship Agreement
• AIM vs Nasdaq Offering
What We Will Discuss
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• Place of Incorporation
• Israeli Companies Law, 1999
• Israeli Concentration Law, 2013
• Israeli Securities Law, 1968
Israeli Statutory Framework
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• Independent framework imposing governance and other requirements
• Israeli company traded on Main Market or AIM will need to comply with
corporate governance requirements of Companies Law
• With limited exceptions, all requirements of Companies Law continue to
apply after IPO on Main Market or AIM
• External and independent directors
• Corporate governance rules on board and committee composition of
public companies
Israeli Companies Law Issues
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• Audit committee and comp committee requirements
• Shareholder approval of certain transactions/controlling shareholder
transactions
• Compensation policy
• Directors and officers indemnification
• General tender offer rules
• Distributions
Israeli Companies Law Issues (cont.)
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Exceptions:
• Potential extra compensation to external directors
• No 20% rule for private placements
• Procedures relating to shareholder meetings
Some exceptions apply only to select U.S. exchanges:
• extra terms for external directors
• extra terms for independent directors
• no need for majority external directors on comp committee if no
controlling shareholder
Israeli Companies Law Issues (cont.) - Exceptions
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Israeli Companies Law Issues Corporate Governance Requirements – Comparison Chart
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NASDAQ AIM Main Market Companies Law
Majority independent For smaller companies, at least two independent directors
At least half independent plus chairman
Audit Committee – majority independent; Comp Committee – all independent
Independent Directors
Directors nominated by independent committee or independent directors
May be board where majority is independent. Nomination committees rare
Majority committee independent
Directors generally nominated by board
Nomination of Director
Minimum of three, all independent
Two independent members; company chairman may not be chair
Minimum of three, all independent
Minimum of three, including all external directors and a majority independent
Audit Committee
Financial expert on audit committee
Same as Main Market At least one should have recent and relevant financial experience
Board determines number, with minimum of one (who must be external)
Financial expert
Israeli Companies Law Issues (cont.) Corporate Governance Requirements – Comparison Chart
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NASDAQ AIM Main Market Companies Law
Shareholder approval of option plans
Only required for reverse takeovers, fundamental changes in business and cancellation of listing
Option plans and grants at below market value require shareholder approval
No shareholder approval for option plans; grants to directors or controlling shareholders require
Shareholder approval for option plans
Compensation approved by independent comp committee
No set guidelines Approved by board of directors and remuneration committee, all indep
Approved by board of directors and compensation committee, all indep
Officer Compensation
May follow home country practices in lieu of certain NASDAQ governance requirements
No exceptions but QCA recommends doesn’t require
No exceptions but Code recommends doesn’t require
Foreign Private Issuers exemption
• Which companies may dual-list on the TASE from Main Market?
• Companies traded on Main Market for at least one year; or
• Companies traded on Main Market for less than one year - provided
that market capitalization exceeds USD 150 million
• All companies must have only one class of shares
• Dual-listing process for companies listed on the Main Market
• Publish a registration form, including only technical information about
the company and its issued securities
• Enclose to the registration form recent various reports and information
published in the UK
Israeli Securities Law Issues - Dual Listing on Main Market
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Dual reporting for companies already on TASE
• Need majority approval of each class of securities (no including
controlling shareholder)
Dual listed companies’ ongoing disclosure requirements
• Financial statements and all other disclosures submitted to the Main
Market must also be submitted in Israel, in the exact same format
• In general, must file in Israel when file with main market
• Reports received by company regarding changes in holdings of
company shares by interested parties shall be submitted to TASE
Israeli Securities Law Issues - Dual Listing on Main Market (cont.)
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Preemption Rights
• Listed company proposing to issue equity securities for cash must first offer
to existing holders of that class in proportion to their holdings
• Foreign issuers required to include preemption rights in their articles
• These rights can be “disapplied” on annual basis up to agreed limits with
special shareholder approval (75% of shareholders present)
• Concern – may be considered public offering if > 35 Israeli shareholders
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• From UK Takeover Code - binding on U.K. companies
• Nomad will want some similar provisions in foreign company articles
• Person/group acquiring 30% or more of voting rights must make cash tender
offer to all shareholders at not < highest price paid by offeror in last 12
months
• Same for shareholder/group holding 30%-50% of voting rights and wants to
acquire additional voting rights
• > 50% shareholdings – no requirement
Tender Offer Rules
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• Could significantly affect ability to obtain/increase/sell control
• Differences from Israeli tender offer rules
• Thresholds – 25%/45%
• Limited to 5%
• Price
• Exceptions if seller is above threshold
Tender Offer Rules (cont.)
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• Required on Main Market not AIM
• Often found in AIM offerings
• Topics – arms’ length related party transactions, limits on delisting, non-
compete
• Nomad may be satisfied with incorporating Israel Companies Law
requirements
Relationship Agreement
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AIM vs. Nasdaq Offering
• Regulator – process coordinated by Nomad; securities authority/exchange
not involved directly
• Listing Requirements – Nomad responsible for assessing appropriateness;
Nasdaq – more objective listing requirements
• AIM Admission Document – no drafts submitted to exchange, only
reviewed by Nomad
• Nasdaq process typically longer
• Corporate governance requirements post-issuance – both involve comply or
disclose; more limited for AIM companies
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1 Azrieli Center. Tel Aviv 6701101, Israel | Tel: +972 3 607 4444 | Fax: +972 3 607 4422
1 Shmuel Hanagid St. Jerusalem 9459201, Israel | Tel: +972 2 623 2683 | Fax: +972 2 623 6082
www.gkh-law.com | [email protected]
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