ISRAEL Law and Practice Contributed by: Barak Platt, Micki Shapira and Moshe Pasker, Arnon, Tadmor-Levy
mentioned in 8.2 Special or Ad Hoc Commit- tees . 8.4 Independent Outside Advice As a general practice, the company’s legal coun - sel, whether external or in-house, advises the directors on various corporate governance mat - ters, including regarding business combination issues. It should be noted that, under Israeli law, a director has the right to appoint independent professional advisors (including legal counsel), at the company’s expense, in “special cases” where they deem it necessary, subject to board or court approval. This right is rarely exercised. However, the appointment of external advisors is common in the context of an independent com - mittee reviewing transactions with a controlling shareholder (as noted in 8.2 Special or Ad Hoc Committees ). To ensure an informed and inde - pendent decision-making process, these com - mittees typically engage professional advisors, including legal and financial experts. 8.5 Conflicts of Interest Under Israeli law, officers and directors are required to refrain from conflicts of interest and act in the company’s best interests. In addition, transactions involving conflicts of interest may be subject to strict approval mechanisms and enhanced disclosure obligations. In recent years, courts in Israel have conducted quite extensive judicial review of the conduct of shareholders (due to the absence of their obligation to report on personal interest), as well as of officers and directors in conflict of interest situations, both in private and public companies. This scrutiny is particularly rigourous in cases of a transaction between a company and its officers or controlling shareholders, which fails to meet the applicable legal requirements (for
example, transactions against the best interests of the company), or which may prejudice the rights of minority shareholders.
9. Defensive Measures 9.1 Hostile Tender Offers
Under Israeli law, there is no prohibition against conducting a hostile tender offer, as long as the tender offer complies with the relevant regula - tions. In the case of a full tender offer, there is a requirement to obtain a special majority of 95% of the shareholders to enforce the sale on minor - ity shareholders, along with a right of sharehold - ers to appeal to the court regarding the price in the tender offer within six months, which reduc - es the attractiveness of these deals. Furthermore, in many public companies, there is a controlling shareholder holding more than 50% of the share capital, which significantly reduces the likelihood of a successful hostile tender offer. 9.2 Directors’ Use of Defensive Measures As mentioned in 8.1 Principal Directors’ Duties , in the case of a special tender offer, the board of directors is required to express its opinion on the fairness of the offer price (or explain why it cannot do so), and it must also disclose any personal interest it has in the offer. Additionally, directors are prohibited from acting to thwart the tender offer. Furthermore, when discussing and approving transactions involving the company (such as M&As), directors are obliged to act in the best interests of the company and in line with their fiduciary duties (see 9.4 Directors’ Duties ). Therefore, if the board believes that a certain transaction is not beneficial to the company, it
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