ISRAEL Law and Practice Contributed by: Barak Platt, Micki Shapira and Moshe Pasker, Arnon, Tadmor-Levy
to corporate governance, particularly in public companies without a controlling shareholder, which may affect takeover matters. Key changes include, inter alia: • setting a rebuttable presumption of control for shareholders holding 25% (if no one holds 50%); • replacing the requirement for two external directors with a majority of independent directors; • limiting director terms in public companies to three years, with most of the board expected to change within two years. The Proposed Amendment may limit the ability of compa - nies to adopt takeover protections such as the “staggered board” mechanism; and • requiring an audit committee and board approval for major transactions with share - holders holding 10% or more. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies Under Israeli law, several provisions limit a buy - er’s ability to quietly accumulate shares in a pub - lic company before launching an official offer. Specifically, any acquisition that would result in the purchaser holding: • more than 25% of shares (when no other shareholder holds at least 25%); or • more than 45% of shares (when no other shareholder holds at least 45%) must be conducted through a special tender offer pro - cess, which is subject to specific regulatory requirements. Furthermore, in the context of a partial tender offer, the offeror is required to disclose whether
it has any commitments or intentions to increase its holdings in the company (see 4.6 Transpar- ency ). Additionally, bidders building a stake in a target company are subject to the disclosure obligation mentioned in 4.2 Material Shareholding Disclo- sure Threshold . 4.2 Material Shareholding Disclosure Threshold Under Israeli securities laws, any person who acquires 5% or more of the shares or voting rights in a public company must: • disclose their identity and detailed holdings information to the company; and • report all subsequent purchases or sales of the company’s securities. This information becomes publicly available through the company’s mandatory disclosures to the market. 4.3 Hurdles to Stakebuilding Israeli law does not permit public companies to modify the mandatory 5% reporting threshold for substantial shareholders through corporate documents or by-laws. This requirement is stat - utory and cannot be waived or altered. Additional quantitative limitations apply to tender offers as detailed in 4.1 Principal Stakebuilding Strategies , creating further structural hurdles to stakebuilding. 4.4 Dealings in Derivatives As a general rule, there is no prohibition on inde - pendent trading in derivatives is Israel. However, certain restrictions may apply regarding the pro - vision of advice/marketing related to derivatives, or trading with Israeli clients (such as in a trading
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