ISRAEL Law and Practice Contributed by: Barak Platt, Micki Shapira and Moshe Pasker, Arnon, Tadmor-Levy
to note that there are no appraisal or dissenters’ rights in Israel. For Israeli public companies, a reverse triangular merger is the only viable acquisition structure, because the tender offer rules require that hold - ers of no less than 95% of the target company’s shares accept the offer and provide for a right of appraisal for six months following the trans - action. The only real disadvantage of using a reverse tri - angular merger, and the primary reason they are not used in more acquisitions of private Israeli companies, is that the Israeli Companies Law provides for a period of no less than 50 days between sign and close. Accordingly, there is no flexibility for a simultaneous sign and close, or even a shorter period between sign and close. In addition, the Israeli Companies Law requires the merging companies to provide notices to their creditors, employees and others, so the deal is made public shortly after signing. Asset Acquisitions Perhaps the simplest structure for acquiring a company is an acquisition of the target compa - ny’s assets. The target company’s shareholders do not need to be parties to the agreement, and in some circumstances shareholder approval of the transaction is not even required. This struc - ture offers a number of other advantages to acquirers. For example: • the acquirer can pick and choose which assets it wants; • the target company’s liabilities remain with the target company (other than those liabili - ties that the acquirer agrees to assume); and • depending on the jurisdiction of the acquirer and the type of assets acquired, the acquirer
may be able to amortise the assets it pur - chased. However, there are a few compelling reasons that asset transactions are not more commonly used. Firstly, unlike a share purchase agreement or merger in which the target company’s share - holders are only liable for capital gains tax, an asset transaction involves the target company paying capital gains tax on the sale of its assets to the acquirer and the target company’s share - holders paying capital gains tax upon the distri - bution of the proceeds from the target company to its shareholders. In addition, unlike a share purchase agreement or merger in which the proceeds are paid to the target company’s shareholders at closing, the target company’s shareholders will typically need to wait a number of months before receiv - ing the proceeds of an asset transaction. 2.2 Primary Regulators The primary regulators for M&A activity in Israel are the: • Israel Tax Authority (the “ITA” ) • Israel Securities Authority (the “ISA” ) • Israel Competition Authority (the “ICA” ) and • Israel Innovation Authority (the “IIA” ), in some cases. In addition, acquisitions of interests in compa - nies in certain types of industries may trigger industry-specific licences or permits. For exam - ple, the acquisition of 5% or more of an Israeli bank, insurance company or other financial insti - tution requires government permits. Meanwhile the acquisition of interests in a telecommunica - tions company may trigger a permit requirement from Israel’s Ministry of Communications. Addi - tionally, the State of Israel has the right to restrict
927 CHAMBERS.COM
Powered by FlippingBook