Companies Law, 5759-1999
חוק החברות, תשנ"ט-1999
Published: 1999-05-27Consolidated Hebrew text as of 2026-03-17 · Last amended 2024-09-15✓ Amendment status checked against the Knesset legislation record on 2026-09-28
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Chapter IV-A: Compensation Policy for Office Holders
Determination of Compensation Policy for Office Holders§
267a.
(a)The board of directors of a public company or of a private company that is a bond company shall determine a policy in respect of the terms of office and employment of office holders in the company (in this Law — the compensation policy), after having considered the recommendations of the compensation committee submitted to it pursuant to section 118b(1); the compensation policy requires the approval of the general meeting.
(b)In the approval of the general meeting of a public company pursuant to subsection (a), one of the following conditions shall be met:
(1)the majority of votes at the general meeting shall include a majority of all the votes of shareholders who are not controlling shareholders of the company or who do not have a personal interest in the approval of the compensation policy, participating in the vote; in the count of all the votes of the said shareholders, abstentions shall not be taken into account; the provisions of section 276, with the necessary modifications, shall apply to a person who has a personal interest;
(2)the total votes of those opposed from among the shareholders referred to in paragraph (1) did not exceed two per cent of all the voting rights in the company; the Minister may prescribe different rates from the rate referred to in this paragraph.
(c)Notwithstanding the provisions of subsections (a) and (b), the board of directors of the company, except in a public sub-subsidiary, may determine the compensation policy even if the general meeting objected to its approval, provided that the compensation committee and thereafter the board of directors resolved, on the basis of detailed reasons and after reconsidering the compensation policy, that approving the compensation policy notwithstanding the objection of the general meeting is in the interests of the company; for this purpose, "public sub-subsidiary" means a public company controlled by a public company or by a private company that is a bond company, which is itself controlled by a public company or by another private company that is a bond company, which is controlled by a controlling shareholder.
(d)A compensation policy for a period exceeding three years requires approval once every three years; approval pursuant to this subsection shall be given in the manner in which the compensation policy is determined pursuant to subsections (a) to (c).
(e)Without derogating from the provisions of subsection (d), the board of directors shall examine, from time to time, the compensation policy and also the need to adapt it to the provisions of section 267b if a material change has occurred in the circumstances that existed at the time of its determination or for other reasons.
Considerations in Determining the Compensation Policy§
267b.
(a)The compensation policy shall be determined, inter alia, according to the following considerations:
(1)advancement of the company's objectives, work plan and policy in a long-term perspective;
(2)creation of appropriate incentives for office holders in the company, taking into account, inter alia, the company's risk management policy;
(3)the size of the company and the nature of its activities;
(4)in respect of terms of office and employment that include variable components — the contribution of the office holder to the achievement of the company's objectives and to the maximisation of its profits, all in a long-term perspective and in accordance with the office holder's function.
(b)The compensation policy shall include, inter alia, reference to the matters specified in Part A of First Schedule A, and there shall be established therein, inter alia, provisions as specified in Part B of the said Schedule.
(c)The Minister, after consulting with the Securities Authority and with the approval of the Constitution, Law and Justice Committee of the Knesset, may, by Order, amend First Schedule A.
Regulations in Respect of Chapter IV-A§
267c.
The Minister, after consulting with the Securities Authority, may prescribe that the provisions of this Chapter shall not apply to classes of public companies or of bond companies, as the Minister shall prescribe.
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Contact Us →Chapter V: Transactions with Interested Parties
Definition of Controlling Shareholder§
268.
In this Chapter, "controlling shareholder" means a controlling shareholder within the meaning of section 1, including a person who holds twenty-five per cent or more of the voting rights at the general meeting of the company if no other person holds more than fifty per cent of the voting rights in the company; for the purpose of holding, two or more persons who hold voting rights in the company and each of whom has a personal interest in the approval of the same transaction brought for the approval of the company shall be deemed to hold jointly.
Duty of Disclosure§
269.
(a)An office holder in a company or a controlling shareholder in a public company or in a private company that is a bond company who knows that that person has a personal interest in an existing or proposed transaction of the company shall disclose to the company, without delay, and no later than the board of directors meeting at which the transaction is first discussed, the nature of that personal interest, including any material fact or document.
(b)The provision of subsection (a) shall not apply where the personal interest arises solely from a personal interest of a relative in a transaction that is not an extraordinary transaction.
(c)An interested party, within the meaning of section 270(5), or a person who will become a controlling shareholder as a result of a private placement, who knows that that person has a personal interest in the material private placement, shall disclose to the public company, without delay, the nature of that personal interest, including any material fact or document.
Transactions Requiring Special Approvals§
270.
The following transactions of a company require approvals as prescribed in this Chapter, provided that the transaction is in the best interests of the company:
(1)a transaction of a company with an office holder therein, and also a transaction of a company with another person in which an office holder of the company has a personal interest; however, the following shall not be regarded —
(a)an office holder in a parent company and also in a subsidiary that is wholly controlled and wholly owned by it, as having a personal interest in a transaction between the parent company and the subsidiary, by reason of the mere fact of being an office holder in both of them or by reason of being a shareholder or a holder of a security convertible into shares in the parent company;
(b)an office holder in a number of subsidiaries that are under the full control and full ownership of the same person, as having a personal interest in a transaction between such subsidiaries, by reason of the mere fact of being an office holder in the contracting companies;
(2)an engagement of a company with an office holder therein who is not a director, with respect to the terms of that person's tenure and employment;
(3)an engagement of a company with a director therein with respect to the terms of that person's tenure and employment, in relation to that person's tenure as a director, and also in relation to that person's employment in other positions — if so employed;
(4)an extraordinary transaction of a public company with its controlling shareholder, or an extraordinary transaction of a public company with another person in which the controlling shareholder has a personal interest, including a private placement in which the controlling shareholder has a personal interest; and also an engagement of a public company with its controlling shareholder or with a relative thereof, directly or indirectly, including through a company under that person's control, with respect to the receipt of services by the company, and also if that person also serves as an office holder therein — with respect to the terms of that person's tenure and employment, and if that person is an employee of the company and does not serve as an office holder therein — with respect to that person's employment in the company;
(4a)an extraordinary transaction of a private company that is a bond company, with its controlling shareholder, or an extraordinary transaction of such a company with another person in which the controlling shareholder has a personal interest, and also an engagement of such a company with its controlling shareholder or with a relative thereof, directly or indirectly, including through a company under that person's control, with respect to the receipt of services by the company, and also if that person also serves as an office holder therein — with respect to the terms of that person's tenure and employment, and if that person is an employee of the company and does not serve as an office holder therein — with respect to that person's employment in the company;
(5)
(a)a private placement in respect of which one of the following conditions is met:
(1)a placement conferring twenty per cent or more of the total voting rights in the company in practice prior to the issuance, where the consideration, in whole or in part, is not in cash or in securities listed for trading on a stock exchange, or is not on market terms, and as a result of which the holdings of a substantial shareholder in the securities of the company will increase, or as a result of which a person will become a substantial shareholder after the issuance (in this Law — an interested party);
(2)as a result of which a person will become a controlling shareholder of the company;
(b)for the purposes of this paragraph, all private placements in respect of which one of the following conditions is met shall be regarded as a single private placement:
(1)they were made during a period of 12 consecutive months to the same offeree or to a person acting on that person's behalf, to a relative thereof, to a corporation under that person's control or under the control of that person's relative, and where the offeree is a corporation — also to the controlling shareholders of the offeree, to a relative of the controlling shareholder, and to a corporation under the control of the controlling shareholder or under the control of that person's relative;
(2)they were made during a period of 12 consecutive months and consideration was fixed in them for the same asset, and different securities of one company shall be regarded as the same asset;
(3)they constitute part of a single transaction or are conditioned upon one another;
(c)for the purposes of market terms under this paragraph, a placement shall be regarded as a placement on market terms if the board of directors has determined, on the basis of detailed reasons, that the placement is on market terms, unless the contrary is proved, and for the purposes of holding under this paragraph, securities convertible into or exercisable for shares, which that person holds or which are to be issued to that person pursuant to the private placement, shall be regarded as if they had been converted or exercised.
Transactions That Are Not Extraordinary§
271.
A transaction that satisfies the conditions of section 270(1) and that is not an extraordinary transaction requires approval of the board of directors, unless another manner of approval has been prescribed in the articles of association.
Irregular Transactions with an Office Holder and Transactions with an Office Holder who is not a Director in respect of Terms of Office and Employment§
272.
(a)A transaction of a company in which the matter set out in section 270(1) applies and which is an irregular transaction, or a transaction of a private company that is not a bond company in which the matter set out in section 270(2) applies, requires the approval of the audit committee and thereafter the approval of the board of directors.
(b)Where a private company that is not a bond company has no audit committee, the transaction requires the approval of the board of directors alone if the office holder is not a director, and if the office holder is a director — also the approval of the general meeting.
(c)
(1)A transaction of a public company or a private company that is a bond company in which the matter set out in section 270(2) applies, other than a transaction with the general manager of the company as referred to in subsection (c1), requires the approval of the compensation committee and thereafter the approval of the board of directors;
(2)The approval of the compensation committee and of the board of directors pursuant to paragraph (1) shall be in accordance with the compensation policy; however, the compensation committee and thereafter the board of directors may, in special cases, approve a transaction as referred to in that paragraph not in accordance with the compensation policy, where both of the following are satisfied:
(a)the compensation committee and thereafter the board of directors approved the transaction, inter alia, according to the considerations listed in section 267b(a), having regard to the matters set out in Part A of the First Schedule A and on condition that the provisions set out in Part B of that Schedule are included, inter alia, in the terms determined in the transaction;
(b)the general meeting approved the transaction, provided that in a public company the matter set out in section 267a(b)(1) or (2) applies;
(3)Notwithstanding the provisions of paragraph (2), in a company, other than a public grandchild company as defined in section 267a(c), the compensation committee and thereafter the board of directors may, in special cases, approve a transaction as referred to in that paragraph even if the general meeting opposed the approval of the transaction, provided that the compensation committee and thereafter the board of directors resolved to do so, on the basis of detailed reasons, after reconsidering the transaction and examining, in such deliberation, inter alia, the objection of the general meeting.
(c1)
(1)A transaction of a public company or a private company that is a bond company with the general manager of the company, in which the matter set out in section 270(2) applies, requires the approval of the following in this order:
(a)the compensation committee;
(b)the board of directors;
(c)the general meeting, provided that in a public company the matter set out in section 267a(b)(1) or (2) applies; for the purpose of the approval of the general meeting pursuant to this sub-paragraph, the provisions of subsection (c)(3) shall apply;
(2)The approval of the compensation committee and the approval of the board of directors as referred to in paragraph (1) shall be in accordance with the compensation policy; however, the compensation committee and thereafter the board of directors may, in special cases, approve the transaction not in accordance with the said policy, provided that the matter set out in subsection (c)(2)(a) applies; nothing in this subsection derogates from the provisions of paragraph (1)(c);
(3)Notwithstanding the provisions of paragraph (1)(c), the compensation committee may exempt from the approval of the general meeting a transaction with a person who is a candidate to serve as general manager of the company and in respect of whom the matter set out in section 240(b) applies, if it has found, on the basis of reasons it has detailed, that bringing the transaction before the general meeting for approval would frustrate the engagement, provided that the transaction is consistent with the compensation policy.
(d)Notwithstanding the provisions of subsections (a), (c) and (c1), a transaction in which the matter set out in section 270(2) applies and which is a modification of an existing transaction requires the approval of the audit committee or the compensation committee, as the case may be, alone, if that committee has approved that the modification to the terms of the transaction is not material relative to the existing transaction.
Transaction with a Director in respect of Terms of Office and Employment§
273.
(a)A transaction of a company in which the matter set out in section 270(3) applies requires the approval of the board of directors and thereafter the approval of the general meeting, and in a public company and also in a private company that is a bond company, the transaction requires the approval of the compensation committee prior to the approval of the board of directors.
(b)The approval of the compensation committee and the approval of the board of directors as referred to in subsection (a), in a public company and in a private company that is a bond company, shall be in accordance with the compensation policy; however, the compensation committee and thereafter the board of directors may, in special cases, approve the transaction not in accordance with the said policy, provided that the matter set out in section 272(c)(2)(a) applies and also, in a public company — the matter set out in section 267a(b)(1) or (2) applies in the approval of the general meeting.
Private Placement§
274.
A material private placement requires the approval of the board of directors and thereafter the approval of the general meeting.
Transaction with a Controlling Shareholder§
275.
(a)A transaction in which the matter set out in section 270(4) applies requires the approval of the following in this order:
(1)the audit committee, and in a transaction in respect of terms of office and employment — the compensation committee;
(2)the board of directors;
(3)the general meeting, provided that one of the following is satisfied:
(a)the majority count of votes at the general meeting includes a majority of all votes of shareholders who have no personal interest in the approval of the transaction, participating in the vote; in counting all the votes of the said shareholders, abstentions shall not be taken into account;
(b)the total number of opposing votes among the shareholders referred to in sub-paragraph (a) did not exceed two per cent of all voting rights in the company.
(a1)
(1)A transaction as referred to in subsection (a) for a period exceeding three years requires approval as referred to in that subsection, once every three years;
(2)Notwithstanding the provisions of paragraph (1), a transaction as referred to in the opening passage of section 270(4) alone may be approved for a period exceeding three years, provided that the audit committee has approved that an engagement for such a period is reasonable in the circumstances of the matter;
(3)The provisions of paragraphs (1) and (2) shall apply to a transaction of a company that has become a public company, in respect of the period after it became a public company.
(b)The Minister may prescribe different rates from the rate referred to in subsection (a)(3)(b).
(c)A transaction in which the matter set out in section 270(4a) applies requires the approval of the following alone in this order:
(1)the audit committee, and in a transaction in respect of terms of office and employment — the compensation committee;
(2)the board of directors.
(3)in a transaction in respect of terms of office and employment — the general meeting.
(c1)The approval of the compensation committee and the approval of the board of directors as referred to in subsections (a) and (c), in a transaction concerning terms of office and employment, shall be in accordance with the compensation policy; however, the compensation committee and thereafter the board of directors may, in special cases, approve the transaction not in accordance with the said policy, provided that the matter set out in section 272(c)(2)(a) applies; nothing in this subsection derogates from the provisions of subsection (c)(3).
(d)
(1)The approval of the audit committee or the compensation committee, as the case may be (in this subsection — the committee) and of the board of directors pursuant to the provisions of subsections (a) or (c) shall be given after the committee and the board of directors have examined, inter alia, whether the transaction includes a distribution;
(2)Where the committee or the board of directors has determined that the transaction includes a distribution, the transaction shall be approved only after they have confirmed that the provisions of any law in respect of distribution have been complied with in that regard;
(3)In respect of a bond company, where the committee and the board of directors have determined that a transaction requiring their approval pursuant to subsections (a) or (c) does not include a distribution, they shall examine whether there is a reasonable concern that the transaction will prevent the company from being able to meet its existing and anticipated obligations when they fall due; where the committee or the board of directors has determined that such a concern exists, the transaction shall not be approved.
Disclosure of Personal Interest§
276.
A shareholder participating in a vote pursuant to section 275 shall notify the company before the vote at the meeting, or, if the vote is by means of a voting instrument — on the voting instrument, whether or not that shareholder has a personal interest in the approval of the transaction; where a shareholder has not given such notice, that shareholder shall not vote and that shareholder's vote shall not be counted.
Cumulative Approvals§
277.
Where a transaction satisfies the conditions prescribed in more than one alternative of the alternatives in section 270, the transaction requires approvals in accordance with the provisions applicable to each of the alternatives.
Abstention of Persons with Personal Interests§
278.
(a)A person who has a personal interest in the approval of a transaction, other than a transaction as referred to in section 271, that is brought before the audit committee or the board of directors for approval shall not be present at the deliberation and shall not participate in the vote in the audit committee and in the board of directors; however, an office holder who has a personal interest may be present for the purpose of presenting the transaction, if the chairperson of the audit committee or the chairperson of the board of directors, as the case may be, has determined that that person's presence is required for the purpose of its presentation.
(b)Notwithstanding the provisions of subsection (a), a director may be present at a deliberation in an audit committee and participate in the vote, if a majority of the members of the audit committee have a personal interest in the approval of the transaction, and likewise a director may be present at a deliberation in the board of directors and participate in the vote, if a majority of the directors in the company have a personal interest in the approval of the transaction.
(c)Where a majority of the directors on the company's board of directors have a personal interest in the approval of a transaction as referred to in subsection (a), the transaction also requires the approval of the general meeting.
Audit Committee in a Public Company and in a Private Company that is a Bond Company§
279.
An audit committee in a public company or in a private company that is a bond company shall not be entitled to give any approval required pursuant to this Chapter unless, at the time of giving the approval, the provisions of section 115 are satisfied in relation to it.
Void Transaction§
280.
(a)A transaction of a company with an office holder therein, or a transaction as referred to in section 270(4) and (4a) with a controlling shareholder therein, shall have no effect as against the company and as against the office holder or the controlling shareholder, if the transaction was not approved in accordance with the provisions of this Chapter, including where a material defect occurred in the approval process, or if the transaction was carried out in material deviation from the approval.
(b)A transaction as referred to in subsection (a) shall also have no effect as against another person if that person knew of the personal interest of the office holder or of the controlling shareholder in the approval of the transaction, and knew or ought to have known of the absence of approval for the transaction as required pursuant to this Chapter.
Cancellation of Transaction§
281.
A company may cancel a transaction with another person that requires approval as referred to in this Chapter, other than a transaction as referred to in section 271, and may also claim from that person compensation for the harm caused to it even without cancellation of the transaction, if that person knew of the personal interest of the office holder in the company in the approval of the transaction or of the personal interest of the controlling shareholder in the public company or in the private company that is a bond company in the approval of the transaction, and knew or ought to have known of the absence of approval for the transaction as required pursuant to this Chapter.
Approval of Board of Directors§
282.
A person shall be presumed not to have been required to know of the absence of approval for a transaction as required pursuant to this Chapter, if that person received the approval of the board of directors confirming that all approvals required for the transaction had been obtained.
Remedies§
283.
(a)An office holder who did not disclose a personal interest as referred to in section 269 shall be regarded as having breached the duty of loyalty; a controlling shareholder in a public company or in a private company that is a bond company who did not disclose a personal interest as referred to in that section shall be regarded as having breached the duty of fairness.
(b)An interested party who breached the duty of disclosure as referred to in section 269, or a shareholder who did not disclose a personal interest as referred to in section 276, may be sued by the company for compensation for the harm caused to it as a result of the absence of disclosure.
Regulations§
284.
The Minister may prescribe that the provisions of this Chapter shall not apply to various classes of transactions, provided that in respect of a public company or a bond company, the Minister shall do so after consulting with the Securities Authority.
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