cross border transactions

Posted by: Gadi Ouzan  & Dani Rinot

Considering an investment or acquisition of Israeli company? 

FIRST MOVE: GO STRAIGHT AHEAD TO THE ISRAELI  REGISTRAR OF COMPANIES WEB SITE

If you want to obtain the basic information with respect to your target Israeli company, all you need to do is to browse to the Web Site of the Israeli registrar of companies. The Registrar maintains a computerized database which includes files on each Israeli company.

The main details mentioned in the Registrar’s report are the name and registration number of the company, names of the members of the board of directors, names of shareholders and list of all pledges created by the company on its assets.

Although the names of the board members and shareholders as reported to the Registrar are declarative in nature, the list of pledges has a constitutive nature. A pledge created by an Israeli company shall be considered valid vis-à-vis third parties, only upon its registration with the Registrar of Companies.

As a potential buyer of Israeli activity (whether assets owned by an Israeli company or shares of such company), you should review or instruct your advisor to review – not only the file of the target company, but also the files of its shareholders (where such shareholders are corporations). By reviewing the files of the target company you may discover that the potential assets are pledged to a third party by way of a fixed lien or a floating charge.

The search is not completed yet. By reviewing the files of the shareholders (the selling parties) you may find that the shares which are planned to be purchased are pledged to a third party by way of a fixed lien.

If no fixed lien is registered against the purchased shares, one should also ensure that there is no floating charge registered on the assets of the selling party. Under Israeli law, a floating charge usually applies to all assets of the selling party and such charge probably “covers” the purchased shares as well.

Just a reminder – the content of the Web Site and the files are in Hebrew so you should equip yourself with a Hebrew reader …

Additional comfort for foreign investors – the Israeli legislator is promoting the establishment of an “economic court” to focus on financial cases.

Posted by: Gadi Ouzan  & Dani Rinot

In an effort to improve enforcement of financial related cases in Israel, the Israeli legislator is attempting to establish an “economic court” aimed to address the complexity which very often accompanies cases of this sort. The Government of Israel has recently passed a Bill in first reading, pursuant to which an economic division will be established only within the District Court in Tel Aviv and will handle cases with an economic orientation. The economic division will be comprised of a permanent panel of judges which will preside over such cases, thus allowing them to acquire a sense of proficiency in this field.

Specifically, the “economic court” will focus on civil and criminal cases relating to securities laws, the Companies law, petitions and appeals on decisions of the Tel Aviv Stock Exchange, derivative actions, certain class actions, regulation of financial advisors, civil matters in relation to shareholders’ rights and duties, etc.

Among other reasons, this reform comes as a response to the recent acquittals in several securities cases, in connection to which critics have argued, were the result of the lack of expertise of certain judges in financial matters.

The expectation is that this novel court will create a preeminent proficiency of those judges in financial matters, and thus eventually lead to shortening the duration of judicial procedures, increase the credibility of the judicial system and ultimately enhance market efficiency.  Another aspired outcome is that the perfection of Israeli courts in financial disputes will mitigate some of the concerns of foreign investors from investing in Israel, similar to the affect the Delaware courts had on the State of Delaware turning to a corporate haven.

Although opposition to the establishment of the economic court is growing amongst justice officials, it still remains to be seen what the final legislation will entail and if it will succeed in improving financial enforceability in Israel.