A number of legislative amendments relating to the capital market have been promulgated recently, including:
- Appointments of external directors who are not residents of Israel
This new amendment allows foreign residents to be appointed as external directors of Israeli companies. Therefore, Israeli companies operating predominantly outside of Israel may appoint external directors who are not residents of Israel, provided that the company’s board of directors has approved that, considering the nature of the company’s operations, the appointment of an external director who is not a resident of Israel is justified. The amendment also clarifies that such external directors, who are not residents of Israel, shall be entitled to attend meetings of the board of directors, but they must have an address in Israel for the purpose of service of process.
- Interested-party transactions – more lenient provisions relating to approvals of officers’ remuneration
Discretionary bonuses to officers subject to the CEO
The amendment rescinds the requirement to base variable components (bonuses) of the terms of office and employment of officers subject to the CEO on measurable criteria. This means that the board of directors and the remuneration committee are now allowed to exercise discretion when awarding the entire bonus to such officers. Since this amendment has far-reaching implications, companies should review their remuneration policies and their options with regard to amending them.
Renewal of the engagement with a company’s CEO
Up until now, any renewal or extension of the terms of office and employment of a reporting company’s CEO required a triple approval procedure – by the remuneration committee, by the board of directors and by the general meeting. The amendment specifies that a renewal or extension of this engagement will no longer require the approval of the company’s general meeting, provided that the CEO’s terms of employment have not been improved or provided that no substantive change in terms has been made compared to those approved in the previous engagement, and provided that the terms still comply with the company’s remuneration policy.
The setting the wages of officers subject to the CEO
A CEO shall be able to approve an immaterial update in the terms of engagement with any officer subject to the CEO, provided that the update complies with the remuneration policy. Prior to this amendment, even immaterial updates had required the approval of the company’s remuneration committee.
- Connection between an external director and the company
The new amendment that has come into effect provides a solution for the instance whereby negligible connection are discovered between an external director and the company’s controlling shareholder during the director’s incumbency in the company. According to the amendment, business or professional connection will no longer constitute an interest that prevents the external director from continuing to hold office, under the following conditions: the connections are negligible for both the director and the company; the director attests that he/she did not know and could not have known about the interest arising and that he/she has no control over the existence or end of the interest; the audit committee has approved, based on the information issued to it, that the ties are negligible for both the director and for the company.
- Announcements and advertisements about general meetings
The amendment to the Companies Regulations (Announcement and Advertisement of a General Meeting and a Class Meeting in a Public Company and the Addition of a Item to an Agenda) enables companies to advertise an announcement of a meeting being convened in conformity with the Companies Law on its website, in lieu of the previous requirement of advertising the announcement of the meeting in two daily newspapers. To dispel any doubt, we clarify that the obligation to advertise announcements in newspapers is still in effect pursuant to the Securities Law and the Securities Regulations; therefore, advertising announcements solely on the company’s website and not in newspapers is not permitted pursuant to the Securities Law.
- Foreign mutual funds’ entry into the Israeli market
Last month the final binding version of regulations was promulgated that will enable offers to invest in foreign mutual funds to the Israeli public. The regulations are expected to come into effect in November 2016.
Up until now, the mutual funds offered to the Israeli public were solely Israeli funds; the new regulations are supplementing an amendment to the Joint Investment Trust Law enacted in 2014, which allows foreign fund offerings to the Israeli public.
Pursuant to the regulations, the Israel Securities Authority may allow a foreign fund manager to offer foreign fund units to the public in Israel pursuant to a prospectus, under a number of conditions: the value of the total assets managed by the foreign fund manager must be at least USD 20 billion; the value of the assets managed in the mutual funds under the foreign fund manager’s management during the two years preceding the proposed offering in Israel was at least USD 0.5 billion; the foreign fund manager must manage at least five mutual funds abroad, whose units have been offered to the public for at least five years; the value of the foreign mutual fund to be offered in Israel must be at least USD 50 million; the fund does not specialize in investments in Israel; and more.