ISRAEL Law and Practice Contributed by: Barak Platt, Micki Shapira and Moshe Pasker, Arnon, Tadmor-Levy
It is worth noting that, despite this, in cases where extensive or sensitive disclosure is required, such as in a transaction with a con - trolling shareholder, some companies voluntarily elect to disclose full copies of certain transaction documents, such as the purchase agreement.
cial or ad hoc committees in Israel to negoti - ate significant transactions involving controlling shareholders. Their purpose is to ensure a fair, market-like process that secures the best terms for the company, simulating an arm’s-length negotiation with an unrelated party. The use of independent special committees for approving transactions with controlling share - holders (mainly in “going-private” transactions) has increased following several court rulings, which established that if a company appoints an independent committee that conducts effective and unbiased negotiations, the business judge - ment rule will generally apply in judicial review of the transaction. This serves to limit the scope and standard of scrutiny over the transaction approval process (see 3.1 Significant Court Decisions or Legal Developments and 8.3 Busi- ness Judgement Rule ). The common practice is that such an inde - pendent special committee will consist solely of external and independent directors, who have no conflicts of interest or ties to the controlling shareholder or the transaction. 8.3 Business Judgement Rule The Supreme Court of Israel has embraced the business judgement rule with respect to judicial review of board decisions. According to this rule, decisions made by the board are presumed val - id and protected from judicial review, provided that the decision was made without conflict of interest, in good faith and based on all relevant information. This rule generally applies to board decisions regarding M&As, as well as transactions with controlling shareholders, provided that an inde - pendent special committee is established, as
8. Duties of Directors 8.1 Principal Directors’ Duties
Under Israeli law, directors are subject to a gen - eral duty of care and a duty of loyalty towards the company, including in the context of approv - ing M&A transactions. As part of these duties, the board must exercise independent judge - ment, acting solely in the best interests of the company (and not, for example, in favour of a particular shareholder), by thoroughly assessing the prospective transaction, including consider - ing terms, risks, effects and alternatives. In the context of a special tender offer, the board of directors of the target company is required to provide its opinion regarding the fairness of the offer to the offerees (and if it is unable to do so, it must specify the reasons). The board must also disclose in advance any personal interest that any of its directors may have in the tender offer or in connection therewith. A director of the target company who acts with the intention of thwarting the tender offer may be held liable for damages to the bidder and the offerees, unless the director acted in good faith and had reasonable grounds to believe that their actions were in the best interests of the com - pany. 8.2 Special or Ad Hoc Committees Although not legally required, in recent years, there has been growing use of independent spe -
937 CHAMBERS.COM
Powered by FlippingBook