ISRAEL Law and Practice Contributed by: Benjamin (Benny) Sheffer and Lance Blumenthal, S. Horowitz & Co.
pany must immediately disclose it publicly through a TASE filing to avoid violating insider trading prohibi- tions. Therefore, a company may provide non-material or confirmatory information selectively to one bidder under confidentiality but if the information could influ- ence the price of the company’s securities, in such circumstances, it must be disclosed not just to com- peting bidders, but also to all investors. In practice, Israeli public companies tend to limit the scope of due diligence and confine it to data already available in public reports or to information that is clearly non-material. The board of directors has wide discretion to deter- mine: • what level of due diligence to allow; and • which bidder(s) will be given access to non-public information, provided it acts in good faith and for the company’s best interests (Companies Law, 1999, Sections 11–12 and 252–254). The board must balance the need to maximise share- holder value (by facilitating a competitive bidding pro- cess) against the risks of leaking sensitive information or violating confidentiality obligations. In transactions involving regulated entities (such as energy licensees, electricity producers, or infrastruc- ture concessionaires), the board often must also con- sider regulatory confidentiality and Ministry of Energy or Electricity Authority restrictions. 7.2 Restrictions In Israel, several legal and regulatory restrictions may limit the scope of due diligence for energy and infra- structure companies including, inter alia, the following. • Regulatory and licensing limits – energy projects are often governed by licenses or concessions issued by the Ministry of Energy, Electricity Author- ity or Natural Gas Authority. These generally con- tain confidentiality clauses restricting disclosure
of technical, operational or financial data without regulator consent. • Security and strategic infrastructure – projects that are considered to be strategic assets (for example, power plants, ports or gas networks) may be sub- ject to national security clearance requirements. Disclosure of sensitive information may require prior approval from the National Security Council or the Foreign Investment Advisory Committee. • Environmental and planning data – under the Plan- ning and Building Law, 1965 and environmental legislation, some environmental information is publicly accessible, but detailed assessments and monitoring data often require Freedom of Informa- tion requests or regulator approval before sharing. • Data privacy – the Protection of Privacy Law, 1981 restricts the transfer of personal employee or customer data. Only essential, anonymous, or consent-based data may be shared, and trans- fers abroad must comply with the Transfer of Data Abroad Regulations, 2001. • Securities and confidentiality rules – for public companies, the Securities Law, 1968 and TASE regulations prohibit selective disclosure of inside information. Any material non-public information provided to a bidder must be publicly reported, effectively limiting the depth of due diligence. In Israel, a bid needs to be made public when it reach- es a stage where it could materially affect investors’ decisions or the market price of the company’s shares. The requirement to make a bid public arises under the Israeli Securities Law, 1968, the Companies Regula- tions (Tender Offer), 2000 and the TASE Rules. This legislation aims to ensure transparency and protect investors by requiring disclosure of material informa- tion. Specific rules apply to the disclosures including, 8. Disclosure 8.1 Making a Bid Public
inter alia, the following. • Timing of disclosure:
(a) a public company must report any material development immediately that could reasona- bly affect its share price or investors’ decisions.
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