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IL companies listed in the US may be eligible for exemptions


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A couple of weeks ago Prof. Shmuel Hauser spoke at the 2020 Forecast Conference, hosted by TheMarker. If you haven’t read the press I recommend doing so here – the chairman of the Israel Securities Authority shared with the audience of his dream to someday bring an end to the IPO draught, and in doing so listed many steps the capital market regulators are taking in their quest to make the Tel Aviv Stock Exchange more attractive to emerging companies.

While many efforts are aimed at bringing in new companies, the ISA and the TASE are also trying to make life easier for listed companies by removing obstacles and reducing regulation where possible. One such place where regulation has been reduced applies to Israeli companies listed for trade on stock exchanges in the United States.

Recent amendments to the Companies Regulations published in April 2016 set forth that companies listed for trade on NASDAQ, NYSE or AMGX that meet certain criteria can be exempt from the requirement to appoint external directors, as generally required from public Israeli companies.

The criteria for the external director exemption are:

  1. not having a controlling shareholder; and
  2. compliance with US law and the rules of the applicable stock exchange regarding appointment of independent directors.

It seems our legislator has come to the conclusion that Israeli companies listed for trade in the US, and that do not have a controlling shareholder and at the same time comply with provisions of US laws with respect to the appointment of independent directors, have an adequate mechanism to safeguard the interests of the investor public.

Similarly, the recent amendments also remove the requirement to comply with both Israeli and US laws with respect to the composition of the audit and compensation committees, and companies can now choose to comply only with US law.

For years, Israeli companies listed abroad have struggled both with the external director provisions and with the need to comply with two sets of laws with respect to committee composition. Now, finally, they can apply for exemption and have one or two less things to worry about.

Ori Zanco, Partner

Ori Zanco deals with challenging issues of corporate governance and regulatory compliance, securities law and capital markets, ISA and TASE reporting obligations, public equity and debt financing.

Read more posts by Ori here.   +972.9.9500555   LinkedIn

DISCLAIMER: Blog posts are not designed to provide legal advice or create a lawyer-client relationship. You should not take action based on this content.


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