The legislative proposal for the advancement of investments in companies operating in the hi-tech field was approved only a few days ago by the Finance Committee of the Knesset for second and third readings. The proposal includes amendments to the Securities Law, on various crowdfunding issues, easing up of disclosure requirements as well as corporate governance requirements and the establishment of traded hi-tech funds. This is with the aim of creating sufficiently attractive conditions for the raising of capital in order that these companies will stay in Israel.
The legislative proposal contains the general framework for the concessions, while the detailed arrangements are to be handled by specific Regulations to be promulgated.
For example, within the framework of the legislative proposal, it is suggested to add to Section 15B of the Securities Law – which section addresses the duty to publish a prospectus when making an offering to the public – an exception for crowdfunding, subject to certain limits (such as the amount of crowdfunding) which will be set forth in Regulations, which in principle were laid out in the proposal of the Securities Authority of 27.7.2014 and which were reported in one of our previous newsletters.
This amendment is likely to be used as a good alternative for new hi-tech companies which do not intend, or are unable, to raise capital from the public via the Stock Exchange. This is novel model for raising funds which is currently being tested in other countries throughout the world as an alternative to traditional financing channels.
More concessions are expected to apply to hi-tech companies. According to the proposal immediately after listing on the Stock Exchange it will be included in the TA-hi-tech index, in accordance with Regulations which are to be promulgated later by the Minister of Finance in accordance with the recommendation of the Securities Authority. These Regulations will address the easing up on the obligation to disclose such as in the preparation of the prospectus in the English language and the preparation of the financial reports according to an internal audit, as part of the American general accounting principles. The exemption from ISOX requirements and these concessions and the desire to create attractive conditions for raising capital for hi-tech companies on the part of the Exchange should point to an independent analysis for these companies and even give tax incentives on hte part of the tax authorities to investors and entrepreneurs.
It is also proposed that the establishment of capital venture funds should be allowed which funds will be traded and which will invest in hi-tech in Israel, using the closed trust fund model the units of which will be available for trade on the Exchange.
Within the framework of the said legislative proposal, it is even suggested that a new capital raising method will be added to general companies using off the shelf prospectus method with only a shelf proposal. The at the market offering (ATM offering) will enable greater flexibility and decrease the expenses of the offering.
Reference: Legislative Proposal for the Advancement of Investments in Companies Operating in the Hi-Tech Field (Legislative Amendments), 5776-2015