mhealth israel_barry levenfeld_start-up nation: the legal framework
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
Start-Up Nation: the Legal Framework
June 29, 2015
Adv. Barry Levenfeld
Barry Levenfeld, [email protected] Levenfeld, [email protected]
Selected M&A Transactions Represented
in its acquisition of
Undisclosed ValueDecember, 2014
Represented
in its acquisition by
Undisclosed ValueOctober, 2014
Represented
in its acquisition by
$95,000,000October, 2014
Represented
in its acquisition by
Undisclosed ValueAugust, 2014
Represented
in its acquisition by
NIS 500,000,000May, 2014
Represented
in its acquisition of
$360,000,000May, 2014
Represented
in its acquisition of
$570,000,000April, 2014
Represented
in its acquisition of
Undisclosed ValueJanuary, 2014
Represented
in its acquisition by
$130,000,000January, 2014
Represented
Represented Represented Represented Represented
in its acquisition of
in its acquisition ofin its acquisition of
in its acquisition of
in its acquisition of
$235,000,000March, 2013
NIS 465,000,000December, 2012
$650,000,000*according to press reports
August, 2013
Undisclosed ValueJuly, 2013
$42,000,000March, 2013
Represented
in its acquisition by
$370,000,000January, 2015
Represented
in its acquisition of
Undisclosed ValueMarch, 2015
Represented
in its acquisition by
Undisclosed ValueApril, 2015
Represented
in its acquisition by
$374,000,000November, 2014
Represented Represented
in its acquisition of in its acquisition of assets of
$135,000,000November, 2012
$10,000,000May, 2012
Represented
in its investment in
Undisclosed ValueMay, 2012
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
Lessons of 25 Years of Practicing Hi-Tech Law in Israel
“Silicon Valley” practices have been adapted to the Israeli legal and business environment◦ First venture investments in the early 1990s
Corporate, tax and other fields of law revised steadily to level the playing field (more on this later)
Local legal and accounting professions have grown increasingly sophisticated◦ Larger and with more specialization, more like US colleagues, in terms of
professionalism and expertise
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
Then and NowThen Now
Currency Controls Complex and Byzantine Gone!
Stamp TaxInefficient, complex and sometime costly
Gone!
Acquisition by Reverse Triangular Merger
No – only share purchase Yes, like in the U.S.
Tax Free Reorganizations Very fewBetter, but not as good a the U.S.
Capital Gains Treatment for Founders Shares and ESOP
No Yes
Capital Gains Tax on Foreign Investors Yes No
Capital Gains Treatment for VC Carried Interest
NoYes, subject to certain rules
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
Start-Up CompaniesDramatic reduction in capital gains tax rate on founders’ shares (creates tremendous incentive; no more complex tax planning)
Employee Stock Options Plans (taxed at capital gains rates, and only upon exercise – key to incentivizing employees)
Articles of Association (equivalent to Certificate of Incorporation in the US) can accommodate standard venture capital provisions
• Liquidation Preference• Anti-dilution Protection• Minority Shareholder protections• Drag-Alongs, Co-Sales, ROFRs
Bankruptcy is acceptable and common
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
Venture Capital Funds
Industry Jump-Started by “Yozma” Funds in 1990s
Most active VCs are Cayman Island Funds with parallel Israeli funds
Tax ruling regime protects foreign investors
GP’s carried interest taxed at capital gains rates, subject to certain rules
VC deals look and feel like US deals – terms are a mix between East Coast and West Coast standards
Recent government initiatives: biomed fund and risk reduction for institutional investors
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
Raising Money – Recent Developments
Accelerators, Hubs, Incubators• Provide some mentoring and basic services• Provide physical premises• Provide limited funding for a limited period• You must do your due diligence!
Crowd Funding• “Pure” crowd funding not available in Israel yet• “Accredited Investor Clubs” pose challenge to the venture model
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
IP Protection - Key to Hi Tech Success
Patents, Copyrights, Trademarks, Trade Secrets
Data Privacy
Computer Law (not that long ago, Israel still used England’s 1911 Copyright Act)
Encryption Controls
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
Special Incentives for Israeli Technology Companies
Office of the Chief Scientist• R&D funding• Incubator support
Approved/Benefitted Enterprise (tax advantages)
BIRD Foundation
Government Support• Biotech funds and incubators• Encouragement for Institutional Investors
Case Study: Orbimed/J&J/Takeda Incubator
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Barry Levenfeld, [email protected] Levenfeld, [email protected]
Some Reflections on Israeli Hi Tech
Nasdaq v. Nablus
The Role of the IDF
The Role of Universities and Hospitals
The Role of the Global Giants - Do Israeli companies sell out too soon?
The legal infrastructure plays a key role in enabling the hi tech revolution
Israeli laws relevant to hi tech, while not perfect, are similar in many respects to the U.S. and more attuned to hi tech than the laws of most European countries
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Barry Levenfeld, [email protected] Levenfeld, [email protected] 11
Barry Levenfeld Harvard College, AB 1976; Harvard Law School, JD 1979
Made aliyah in 1983
Practiced with Adv. Hanan Melcer, now a Supreme Court justice
Senior Partner in Yigal Arnon & Co.’s Technology Practice Group
International tech clients include eBay, Medtronic, EMC, Oracle, IBM, Symantec, Boston Scientific, CA Technologies
Representation of venture funds, technology start-ups, IPO’s of Israeli companies, and technology M&A transactions
Senior Lecturer, Hebrew University Law Faculty, in high tech corporate finance