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Practical Matters for Israeli Companies Listing in London May 28, 2014

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Page 1: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

Practical Matters for Israeli Companies Listing in London May 28, 2014

Page 2: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

• Israeli Statutory Framework

• Israeli Companies Law Issues

• Israeli Issues – Dual Listing on Main Market

• Preemption Rights

• Tender Offer

• Relationship Agreement

• AIM vs Nasdaq Offering

What We Will Discuss

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Page 3: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

• Place of Incorporation

• Israeli Companies Law, 1999

• Israeli Concentration Law, 2013

• Israeli Securities Law, 1968

Israeli Statutory Framework

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Page 4: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

• Independent framework imposing governance and other requirements

• Israeli company traded on Main Market or AIM will need to comply with

corporate governance requirements of Companies Law

• With limited exceptions, all requirements of Companies Law continue to

apply after IPO on Main Market or AIM

• External and independent directors

• Corporate governance rules on board and committee composition of

public companies

Israeli Companies Law Issues

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Page 5: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

• Audit committee and comp committee requirements

• Shareholder approval of certain transactions/controlling shareholder

transactions

• Compensation policy

• Directors and officers indemnification

• General tender offer rules

• Distributions

Israeli Companies Law Issues (cont.)

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Page 6: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

Exceptions:

• Potential extra compensation to external directors

• No 20% rule for private placements

• Procedures relating to shareholder meetings

Some exceptions apply only to select U.S. exchanges:

• extra terms for external directors

• extra terms for independent directors

• no need for majority external directors on comp committee if no

controlling shareholder

Israeli Companies Law Issues (cont.) - Exceptions

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Page 7: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

Israeli Companies Law Issues Corporate Governance Requirements – Comparison Chart

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NASDAQ AIM Main Market Companies Law

Majority independent For smaller companies, at least two independent directors

At least half independent plus chairman

Audit Committee – majority independent; Comp Committee – all independent

Independent Directors

Directors nominated by independent committee or independent directors

May be board where majority is independent. Nomination committees rare

Majority committee independent

Directors generally nominated by board

Nomination of Director

Minimum of three, all independent

Two independent members; company chairman may not be chair

Minimum of three, all independent

Minimum of three, including all external directors and a majority independent

Audit Committee

Financial expert on audit committee

Same as Main Market At least one should have recent and relevant financial experience

Board determines number, with minimum of one (who must be external)

Financial expert

Page 8: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

Israeli Companies Law Issues (cont.) Corporate Governance Requirements – Comparison Chart

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NASDAQ AIM Main Market Companies Law

Shareholder approval of option plans

Only required for reverse takeovers, fundamental changes in business and cancellation of listing

Option plans and grants at below market value require shareholder approval

No shareholder approval for option plans; grants to directors or controlling shareholders require

Shareholder approval for option plans

Compensation approved by independent comp committee

No set guidelines Approved by board of directors and remuneration committee, all indep

Approved by board of directors and compensation committee, all indep

Officer Compensation

May follow home country practices in lieu of certain NASDAQ governance requirements

No exceptions but QCA recommends doesn’t require

No exceptions but Code recommends doesn’t require

Foreign Private Issuers exemption

Page 9: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

• Which companies may dual-list on the TASE from Main Market?

• Companies traded on Main Market for at least one year; or

• Companies traded on Main Market for less than one year - provided

that market capitalization exceeds USD 150 million

• All companies must have only one class of shares

• Dual-listing process for companies listed on the Main Market

• Publish a registration form, including only technical information about

the company and its issued securities

• Enclose to the registration form recent various reports and information

published in the UK

Israeli Securities Law Issues - Dual Listing on Main Market

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Page 10: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

Dual reporting for companies already on TASE

• Need majority approval of each class of securities (no including

controlling shareholder)

Dual listed companies’ ongoing disclosure requirements

• Financial statements and all other disclosures submitted to the Main

Market must also be submitted in Israel, in the exact same format

• In general, must file in Israel when file with main market

• Reports received by company regarding changes in holdings of

company shares by interested parties shall be submitted to TASE

Israeli Securities Law Issues - Dual Listing on Main Market (cont.)

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Page 11: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

Preemption Rights

• Listed company proposing to issue equity securities for cash must first offer

to existing holders of that class in proportion to their holdings

• Foreign issuers required to include preemption rights in their articles

• These rights can be “disapplied” on annual basis up to agreed limits with

special shareholder approval (75% of shareholders present)

• Concern – may be considered public offering if > 35 Israeli shareholders

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Page 12: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

• From UK Takeover Code - binding on U.K. companies

• Nomad will want some similar provisions in foreign company articles

• Person/group acquiring 30% or more of voting rights must make cash tender

offer to all shareholders at not < highest price paid by offeror in last 12

months

• Same for shareholder/group holding 30%-50% of voting rights and wants to

acquire additional voting rights

• > 50% shareholdings – no requirement

Tender Offer Rules

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Page 13: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

• Could significantly affect ability to obtain/increase/sell control

• Differences from Israeli tender offer rules

• Thresholds – 25%/45%

• Limited to 5%

• Price

• Exceptions if seller is above threshold

Tender Offer Rules (cont.)

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Page 14: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

• Required on Main Market not AIM

• Often found in AIM offerings

• Topics – arms’ length related party transactions, limits on delisting, non-

compete

• Nomad may be satisfied with incorporating Israel Companies Law

requirements

Relationship Agreement

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Page 15: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

AIM vs. Nasdaq Offering

• Regulator – process coordinated by Nomad; securities authority/exchange

not involved directly

• Listing Requirements – Nomad responsible for assessing appropriateness;

Nasdaq – more objective listing requirements

• AIM Admission Document – no drafts submitted to exchange, only

reviewed by Nomad

• Nasdaq process typically longer

• Corporate governance requirements post-issuance – both involve comply or

disclose; more limited for AIM companies

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Page 16: Practical Matters for Israeli Companies Listing in London · • Dual-listing process for companies listed on the Main Market • Publish a registration form, including only technical

1 Azrieli Center. Tel Aviv 6701101, Israel | Tel: +972 3 607 4444 | Fax: +972 3 607 4422

1 Shmuel Hanagid St. Jerusalem 9459201, Israel | Tel: +972 2 623 2683 | Fax: +972 2 623 6082

www.gkh-law.com | [email protected]

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