In light of recent developments regarding private equity funds in Israel, motivated by the challenges faced by companies as well as market needs, the Israeli Securities Authority has promoted a significant amendment, the objective of which is to increase the investors who are eligible to receive an offer of securities in a private placement, without the issuing company being required to publish a prospectus. As a result, the Finance Committee in the Knesset has amended the definition of "eligible investor", (which has not yet entered into force). The amendment sets out non-cumulative and reduced thresholds for the definition of "eligible investor".
The amendment sets out alternative tests (instead of cumulative tests which existed prior to the amendment), by which an individual will be regarded as an "eligible investor", provided that the individual meets one of the following three tests:
- The total value of liquid assets owned by the individual exceeds NIS 8 million (instead of NIS 12 million prior to the amendment);The amendment includes two additional alternatives:
- The individual’s annual income, in each of the last two years preceding the offer, exceeds NIS 1.2 million or NIS 1.8 million for a family unit; or
- The total value of liquid assets owned by the individual exceeds NIS 5 million and the individual’s annual income, in each of the last two years preceding the offer, exceeds NIS 600,000 or NIS 900,000 million for a family unit.
The party issuing the securities is required to verify the fulfillment of these conditions, and in this regard, it is not enough to rely only upon the potential investor's declaration.
The full version of the amendment can be seen here (Hebrew), which will enter into force 30 days from its date of publication (which has yet to be announced).
This amendment is of considerable importance to companies which intend to raise capital from the public, in accordance with the exemptions set out n Section 15A of the Securities Law. Such companies are encouraged to examine the significance of the business opportunities arising from this amendment, in addition to updating their internal working procedures, including in order to ensure that conditions which apply to “eligible investors” will be complied with.