On December 2, 2015, the Israeli Ministry of Justice published draft amendments to three regulations enacted under the Companies Law, 1999 ("the Companies Law") for the public's comments, aimed largely to relieve Israeli companies of various obligations.
The First Proposal
Broadly, the first proposal suggests that in respect of Israeli companies that do not have a controlling shareholder, and are traded on certain U.S. stock exchanges, including the NYSE and NASDAQ1, (i) the appointment of Independent Directors (i.e, directors who have been approved as such by the shareholders, in accordance with the provisions of the applicable foreign law), would be a satisfactory alternative to the mandatory obligation to appoint external directors in accordance with the provisions of the Companies Law; and (ii) the only obligation in respect of the composition of directors in both the Audit Committee and the Compensation Committee of such company, is that they only comprise of Independent Directors (as such term is defined above).
The Second Proposal
The second proposal concerns the engagement of a public company with its CEO or any of its directors, regarding their terms of service and employment. As of today, in order to approve the terms of service and employment of a director or a CEO, following receipt of the approval thereof by the company’s Compensation Committee and Board of Directors, the approval of the General Meeting must be obtained as well. In cases where the appointment of the CEO or a director, or the change to his terms of service and employment, is not made at the time of convening the company's Annual Meeting, the company is forced to convene an Extraordinary Meeting of the shareholders in order to approve such terms of service and employment. This, of course, may lead to substantial costs being incurred by the company. According to this proposal, the General Meeting will be able to approve such engagement post factum if: (i) the engagement has already been approved by the company’s Compensation Committee and Board of Directors; (ii) the terms of service and employment comply with the compensation policy of the company; and (iii) the compensation does not exceed the amount paid to such office holder's predecessor.
The Third Proposal
The third proposal deals with the language of certain notifications to the Companies Registrar. In general, documents that are available to the public by law should be published in Israel's official languages (Hebrew or Arabic). Such view is also shared by the Companies Registrar, who holds that all submitted documents must be in either official language. Documents of such nature submitted to the Companies Registrar include the company’s Articles of Association (whether sent as part of the company’s registration or later on within the notification of their amendment) and charge creation documents (which entails the filing of requests for the registration of such charges).
Frequently, the effect of such policy is that while the said documents are negotiated in English, they would thereafter have to be translated into Hebrew in order to comply with the aforesaid filing requirements. Under such policy, the Hebrew translation is deemed the binding document, which not only amounts to inefficiency by way of incurrence of additional costs, but in some cases could also give rise to interpretation disputes.
This proposed amendment now offers a company the opportunity of submitting its articles of association in English, and to add only a non-notarized Hebrew translation thereof. Further, with respect to the matter of charges, the proposed amendment suggests allowing for the submission of charge creation documents in English as well, provided that a prescribed Hebrew form, containing all principal information regarding such charge, accompanies the request for registration.