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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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Unofficial English translation — for reference only. It may contain errors or omissions and cannot be relied on as a legal text. Only the Hebrew text published in Reshumot is legally binding.More

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Despite these checks, it may contain errors, omissions, or imprecise renderings of legal terminology and cross-references, and it may not yet reflect the latest amendments. It cannot be relied upon as a legal text.

The Hebrew text as published in Reshumot (ספר החוקים) and on the Knesset website is the sole authoritative and legally binding version. In any discrepancy, the Hebrew text prevails.

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Part 8: Acquisition of Companies

Chapter I: Merger

Approvals in the Company§

314.

A merger requires the approval of the board of directors and the general meeting in each of the merging companies, in accordance with the provisions of this Chapter.

Merger Impairing the Solvency of the Company§

315.
(a)The board of directors of a merging company, when considering whether to approve a merger, shall deliberate and determine, having regard to the financial position of the merging companies, whether in its opinion there is a reasonable concern that as a result of the merger the absorbing company will be unable to meet the company's obligations to its creditors.
(b)Where the board of directors has determined that there is a concern as referred to in subsection (a), it shall not approve the merger.

Merger Proposal§

316.

Where each of the boards of directors of the merging companies has approved the merger, they shall jointly draw up a proposal for the approval of the merger (hereinafter — merger proposal) and sign it.

Notice to the Registrar of Companies§

317.
(a)A merging company shall submit the merger proposal to the Registrar of Companies within three days of the date of convening the general meeting.
(b)A merging company shall notify the Registrar of Companies of the decision of the general meeting within three days of the date on which the decision was adopted, shall notify the Registrar of the giving of notices to creditors pursuant to section 318, and shall also submit to the Registrar a copy of the decision of the court pursuant to sections 319 or 321, within three days of the date on which such decision was given.

Notice to Creditors§

318.
(a)A merging company shall send the merger proposal to the secured creditors of the company no later than three days from the date of submission of the merger proposal to the Registrar of Companies.
(b)A merging company shall notify its unsecured creditors of the merger proposal and its content, as the Minister shall prescribe.

Objection of Creditors§

319.

The court may, upon the application of a creditor of a merging company, order the stay or prevention of the execution of the merger, if it has found that there is a reasonable concern that as a result of the merger the absorbing company will be unable to meet the obligations of the merging company, and it may also give directions for the protection of the rights of creditors.

Approval of the Merger§

320.
(a)A merger requires the approval of the general meeting in each of the merging companies.
(a1)Notwithstanding the provisions of subsection (a), a merger does not require the approval of the general meeting in any of the following:
(1)in a target company that is under the full control and ownership of the absorbing company;
(2)in an absorbing company, where all of the following conditions are met:
(a)the merger does not involve any amendment to the memorandum or articles of the absorbing company;
(b)the absorbing company does not allot, in the framework of the merger, more than twenty per cent of the voting rights in the company, and as a result of the allotment no person will become a controlling shareholder of the absorbing company as defined in section 268; for this purpose, securities convertible into or exercisable for shares, which that person holds or which are to be allotted to that person in the framework of the merger, shall be deemed to have been converted or exercised;
(c)the circumstances requiring the approval of the general meeting pursuant to subsections (c) and (d) do not exist.
(b)Where the shares of the target company are divided into classes, the merger also requires the approval of class meetings in the target company.
(c)In a vote at the general meeting of a merging company whose shares are held by the other merging company or by a person who holds twenty-five per cent or more of any class of means of control in the other merging company, the merger shall not be approved if opposed by shareholders holding a majority of voting rights among those participating in the vote, excluding abstentions, who are not among the other merging company, the person holding as aforesaid, or those acting on their behalf, including their relatives or corporations under their control; however, a person shall not be regarded as holding in the other merging company if the holding derives solely from holding shares in the merging company.
(d)Where a person holds twenty-five per cent or more of any class of means of control in a number of merging companies, the merger proposal shall require approval in accordance with the provisions of subsection (c) in each of those merging companies.
(e)Shareholders participating in the vote shall notify the company before the vote, or, if the vote is by means of a voting instrument, on the voting instrument, whether their shares are held by the other merging company or by a person as referred to in subsection (c) or whether they are not so held; where a shareholder has not given such notice, that shareholder shall not vote and the shareholder's vote shall not be counted.
(f)Notwithstanding the provisions of subsection (c), the provisions of section 275(a), (c) and (d) shall apply in respect of the approval of a merger proposal that is a transaction requiring approval pursuant to that section.

Court Approval§

321.
(a)Where the general meeting of a merging company has approved the merger proposal pursuant to section 320(a), the court may, upon the application of shareholders holding at least twenty-five per cent of all voting rights in the company, determine that the company has approved the merger, even if the merger proposal did not receive the approval of all class meetings of the merging company pursuant to section 320(b), or even if the merger proposal did not receive the required majority at the general meeting of the merging company pursuant to section 320(c).
(b)The court shall not approve an application for the approval of a merger unless it is satisfied that the merger proposal is fair and reasonable, having regard to the valuation of the merging companies and the consideration offered to the shareholders.

Notice of the Commissioner of Competition§

322.

Where a company has received a notice from the Commissioner of Competition, within the meaning of the Economic Competition Law, 5748-1988, the company shall notify the Registrar, within three days of the date of receipt of the notice, whether the notice has the effect of staying the execution of the merger, preventing it, or removing such a stay or prevention; where notice of a prevention or stay has been received by the Registrar of Companies, the merger shall not be executed for as long as the prevention or stay has not been removed.

Consequences of the Merger§

323.

Where all the approvals required under this Chapter for the merger have been received by the Registrar of Companies in respect of each of the merging companies, and thirty days have elapsed from the date of the adoption of the decision of the general meeting in each of the merging companies and fifty days have elapsed from the date on which the merger proposals were submitted to the Registrar of Companies, the merger shall be executed as follows:

(1)all the assets and obligations of the target company, including contingent, future, known and unknown obligations, shall be transferred and conveyed to the absorbing company;
(2)the absorbing company shall be deemed to have been the target company in any legal proceeding, including enforcement proceedings;
(3)the Registrar shall transfer the register of charges, within the meaning of section 181 of the Companies Ordinance, of the target company, to the register of charges of the absorbing company;
(4)the target company shall be wound up and the Registrar shall remove it from its registers;
(5)the Registrar shall issue to the absorbing company a certificate attesting to the execution of the merger and shall record the merger in the registers of the absorbing company.

Freedom to Stipulate§

324.

Nothing in the provisions of this Chapter shall prevent a company from undertaking by contract or in its articles to refrain from executing a merger or to make the execution of a merger subject to conditions.

Floating Charge in a Merging Company§

325.

A floating charge over all or some of the assets of one merging company, which imposes a restriction on the company's right to create charges, shall not take priority over a charge created in the other merging company prior to the merger.

Regulations Concerning Merger§

326.

The Minister may prescribe provisions for the implementation of this Chapter, including in respect of the particulars to be included in the merger proposal and in respect of additional rights concerning information to be provided to creditors or to classes of creditors, and also in respect of the registration of transactions arising from the merger; in respect of a merging company that is a public company, or that is a private company that is a bond company, the provisions shall be prescribed after consultation with the Securities Authority.

Transitional Provisions Concerning Merger§

327.
(a)In respect of a company incorporated before the commencement of this Law, its articles shall be deemed to contain a provision whereby the approval of a merger requires a majority at the general meeting of three-quarters of the shareholders participating in the vote, excluding abstentions, and the provisions of section 20 shall apply.
(b)Where floating charges, at least one of which was created immediately before the commencement of this Law, are imposed on the assets of a number of merging companies in such a manner that after the merger it will not be possible to distinguish between the assets subject to each floating charge, the floating charges shall crystallise prior to the merger, unless the consent of the creditors for the security of whose rights those charges are imposed has been obtained, to amend the charges in a manner that creates a distinction between the assets subject to each charge, or to the distribution of the proceeds from the realisation of the assets subject to those charges.

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Chapter II: Special Tender Offer

Acquisition of a Controlling Interest or Control§

328.
(a)In a public company, an acquisition as a result of which a person would become a holder of a controlling interest where there is no holder of a controlling interest in the company shall not be executed, and an acquisition as a result of which the proportion of the acquirer's holdings would exceed forty-five per cent of the voting rights in the company, where no other person holds more than forty-five per cent of the voting rights in the company, shall not be executed, except by way of a tender offer in accordance with the provisions of this Chapter (hereinafter — special tender offer).
(b)The provisions of subsection (a) shall not apply to —
(1)an acquisition of shares in a private placement, provided that the acquisition has been approved at a general meeting as a private placement whose purpose is to confer a controlling interest on the offeree where there is no holder of a controlling interest in the company, or as a private placement whose purpose is to confer forty-five per cent of the voting rights in the company on the offeree where there is no person holding forty-five per cent of the voting rights in the company;
(2)an acquisition from a holder of a controlling interest, as a result of which a person would become a holder of a controlling interest;
(3)an acquisition from a person who holds more than forty-five per cent of the voting rights in the company, as a result of which the proportion of the acquirer's holdings would exceed forty-five per cent of the voting rights in the company.
(c)The provisions of this Chapter shall apply to a special tender offer, in addition to the provisions of any law concerning tender offers, in so far as they are not inconsistent with the provisions of this Chapter.

Opinion of the Board of Directors§

329.

Where a special tender offer has been made, the board of directors of the target company shall give its opinion to the offerees as to the advisability of the special tender offer, or shall refrain from giving its opinion as to the advisability of the special tender offer if it is unable to do so, provided that it shall report the reasons for its abstention; the board of directors shall also disclose any personal interest that each of the directors has in the tender offer or arising from it.

Duties of Office Holders§

330.
(a)An office holder in a target company who, by virtue of his position, performs an act, other than acts as referred to in subsection (b), whose purpose is to frustrate a special tender offer, whether existing or anticipated, or to prejudice the prospects of its acceptance, shall be liable to the offeror and to the offerees for their damage as a result of his acts, unless he acted in good faith and had reasonable grounds to assume that the act taken was in the best interests of the company.
(b)An office holder may negotiate with the offeror for the improvement of the terms of the offer and may also negotiate with others for the formulation of a competing tender offer.

Consent of Shareholders§

331.
(a)A special tender offer shall be directed to all the offerees, and the offerees may notify the company of their consent to the special tender offer or of their objection to it.
(b)A special tender offer shall not be accepted unless a majority by count of votes among the offerees who have notified the company of their position in relation to it have consented to the offer.
(c)In counting the votes of the offerees, the votes of a controlling shareholder of the offeror, and of a person who has a personal interest in the acceptance of the special tender offer, or of a holder of a controlling interest in the company, or of those acting on their behalf or on behalf of the offeror, including their relatives or corporations under their control, shall not be taken into account; the provisions of section 276 shall apply, with the necessary modifications, to a person who has a personal interest.
(d)Where a special tender offer has been accepted, offerees who did not notify the company of their position in relation to the offer or who objected to it may consent to the offer no later than four days from the last date for responding to the tender offer, or at such other time as the Minister may prescribe for this purpose, and they shall be deemed to have consented to the offer from the outset.

Minimum Acceptance§

332.

A special tender offer shall not be accepted unless shares conferring at least five per cent of the voting rights in the company have been acquired pursuant thereto.

Consequences of Prohibited Acquisition§

333.
(a)Shares acquired in contravention of the provisions of this Chapter shall not confer any rights and shall be dormant shares, within their meaning in section 308, for as long as they are held by the acquirer.
(b)Without prejudice to the provisions of subsection (a), where a person's holding of voting rights has risen, otherwise than as a result of an acquisition in accordance with the provisions of section 328, to a level conferring upon that person a controlling interest where there is no holder of a controlling interest in the company, or to a level exceeding forty-five per cent of the voting rights in the company where no other person holds more than forty-five per cent of the voting rights in the company, including as a result of shares of the company having become dormant as a result of a distribution, no voting rights shall be conferred on the shares held by that person in excess of twenty-five per cent or forty-five per cent, as the case may be, for as long as they are held by that person.
(b1)A shareholder shall report to the company on the shares held by that person that do not confer voting rights as soon as possible after becoming aware thereof.
(c)A breach of the provisions of this Chapter constitutes a breach of a statutory duty towards the shareholders of the company.

Subsequent Tender Offer and Subsequent Merger§

334.

Where a special tender offer has been accepted, the offeror, any person who controlled the offeror at the time of the offer, and any corporation under their control, shall not, for one year from the date of the tender offer, make an additional tender offer to acquire shares of the company, and shall not carry out a merger with the company, unless they undertook to do so in the special tender offer.

Regulations§

335.

The Minister, after consulting with the Securities Authority, may prescribe provisions for the implementation of this Chapter, including with respect to the ways of delivering the special tender offer to offerees and receiving their notices, and in that connection may apply the provisions applicable to voting documents, and may also prescribe the timetables according to which a special tender offer shall be conducted and the time for giving the board of directors' opinion.

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