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Law

Companies Law, 5759-1999

חוק החברות

Chapter III: Compulsory Sale of Shares

Section A: Acquisition of Minority Shares by the Controlling Shareholder of a Public Company

Full Tender Offer

336.

[Amendment: 2005, 2011-3]

(a)No person shall purchase shares of a public company or voting rights in such a company (in this Chapter – shares) or a class of shares of a public company, such that following the purchase such person would hold more than ninety percent of the shares of the public company or of the class of shares, except by way of a tender offer to all shares or to the class of shares (hereinafter – full tender offer), which shall be accepted in accordance with the provisions of this Chapter.

(b)Where a person holds shares at a rate exceeding ninety percent of all shares of a public company as referred to in subsection (a) or of a class of shares, such person shall not purchase additional shares for as long as such person holds shares at the said rate.

(c)Notwithstanding the provisions of subsection (b), where a person held, on the 25th of Shevat 5760 (February 1, 2000), shares at the rate referred to in subsection (b), in accordance with the law in effect on the eve of that date, such person shall not purchase additional shares except by way of a full tender offer that has been accepted by the offerees, such that the rate of offerees who did not accept the offer constitutes less than half of the issued share capital, or of the issued capital of the class of shares in respect of which the offer was made; where a full tender offer has been accepted as referred to in this subsection, all shares that the offeror sought to purchase shall pass into the offeror's ownership, and the records of share ownership shall be amended accordingly.

Compulsory Sale

337.

[Amendment: 2011-3, 2011-4]

(a)Where a full tender offer has been accepted by the offerees, such that the rate of holdings of offerees who did not accept the offer constitutes less than five percent of the issued share capital or of the issued capital of the class of shares in respect of which the offer was made, and more than half of the offerees who have no personal interest in accepting the offer have accepted it, all shares that the offeror sought to purchase shall pass into the offeror's ownership and the records of share ownership shall be amended accordingly. The provisions of Section 276 shall apply, with the necessary modifications, to any person who has a personal interest.

(a1)Notwithstanding the provisions of subsection (a), a full tender offer shall be deemed accepted if the rate of holdings of offerees who did not accept the offer constitutes less than two percent of the issued share capital or of the issued capital of the class of shares in respect of which the offer was made.

(b)Where a full tender offer has not been accepted as referred to in subsection (a) or (a1), the offeror shall not purchase, from offerees who accepted the offer, shares that would grant the offeror holdings of more than ninety percent of all shares in the company or of all shares of the class of shares in respect of which the offer was made.

Appraisal Remedy

338.

[Amendment: 2005, 2010-2, 2011-3, 2011-4]

(a)The court may, upon the application of any person who was an offeree in a full tender offer that was accepted as referred to in Sections 336(c) and 337(a) or (a1), determine that the consideration for the shares was less than their fair value, and that the fair value, as determined by the court, shall be paid.

(b)An application as referred to in subsection (a) shall be filed no later than six months from the date of acceptance of the full tender offer.

(c)The offeror may stipulate in the terms of the full tender offer that an offeree who accepted the full tender offer that was accepted as referred to in Section 337(a) or (a1) shall not be entitled to a remedy under this Section.

(d)A stipulation by an offeror pursuant to subsection (c) shall have no effect if the offeror or the company did not publish, prior to the deadline for acceptance of the offer, the information required to be published under any law in connection with the full tender offer.

Tender Offer for Securities

338a.

[Amendment: 2011-3]

Where a full tender offer has been accepted in accordance with the provisions of this Section, and the offeror also made an offer to purchase all securities of the same public company, the provisions of Sections 337 and 338 shall apply, with the necessary modifications, in respect of each class of security, also to the tender offer for such securities.

Conversion of Public Company to Private Company

339.

Where a full tender offer has been accepted in accordance with the provisions of this Section, and the offer was for the only class of shares of the company or for each of the classes of shares of the company held by the public, the company shall become a private company.

Consequences of Prohibited Acquisition

340.

(a)Shares purchased in contravention of the provisions of this Chapter shall not confer any rights and shall be dormant shares, within the meaning of Section 308, for as long as they are held by the purchaser.

(b)A breach of the provisions of this Chapter constitutes a breach of a statutory duty towards the shareholders of the company.

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Section B: Authority to Acquire Shares of Dissenting Shareholders in a Private Company

Authority to Acquire Shares of Dissenting Shareholders in a Private Company

341.

(a)Where a person has offered to acquire shares or a class of shares of a private company (in this Section – the offeror), and shareholders holding eighty percent of the shares subject to transfer have agreed to the offer within two months, the offeror may, within one month after the expiry of the said two months, give notice, in the manner to be prescribed by the Minister, to every shareholder who has not agreed to the offer (in this Section – a dissenting shareholder), that the offeror wishes to acquire that shareholder's shares; in counting the said shareholders, no account shall be taken of a controlling shareholder of the offeror, or of any person acting on behalf of such controlling shareholder or of the offeror, including their relatives or corporations under their control.

(b)Where the offeror has given notice as referred to in subsection (a), the dissenting shareholders are obligated to sell their shares and the offeror is obligated to acquire them, on the terms offered to the shareholders who agreed to the transfer, unless the court has decided otherwise upon application by a dissenting shareholder filed within one month after the date of the notice.

(c)Where the offeror has given notice as referred to in subsection (a) and no contrary decision of the court has been given, the offeror shall, upon the expiry of one month from the date of the notice — or, if at that time an application by a dissenting shareholder is pending before the court, after the court has ruled thereon — send a copy of the notice to the company and transfer to it the consideration for the shares that the offeror is obligated to acquire under this Section, and the company shall register the offeror as the holder of those shares.

(d)The articles of association of the company may prescribe a percentage different from the percentage set out in subsection (a); a resolution to amend the articles of association as aforesaid shall be passed as provided in Section 20.

Transitional Provision

342.

[Amendment: 2005, 2012-2]

In the case of a company incorporated before the commencement of this Law, it shall be deemed as if a provision had been included in its articles of association to the effect that approval of an offer as referred to in Section 341 requires a majority of shareholders holding ninety percent of the shares subject to transfer; however, a resolution to amend the articles of association in a manner that reduces the said majority percentage shall be passed in the manner prescribed under Section 350 or with the consent of all shareholders of the company.

Regulations

342a.

[Amendment: 2005]

The Minister, after consulting with the Securities Authority, may prescribe provisions for the implementation of this Chapter, including with respect to the means of delivering a full tender offer to offerees and receiving their notices, and may in that context apply the provisions applicable to voting instruments, and may also prescribe the timetables according to which a full tender offer shall be conducted.

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Part 8A: Winding Up

Chapter I: General Provisions

Definitions –

342b.

In this Part –

"Special Resolution" – a resolution passed at a general meeting by a majority of three-quarters of the votes of shareholders participating in the vote, and in respect of which all of the following conditions are met:

(1)the notice convening the meeting was delivered to the shareholders at least 21 days before the date of its convening, or, with the consent of all shareholders, at a date closer to the convening;

(2)the agenda of the general meeting included a proposal regarding the winding up of the Company pursuant to this Part;

"Debt" – a certain or contingent debt, liquidated or unliquidated, whether or not its date of repayment has fallen due;

"Insolvency" – as defined in Section 2 of the Insolvency and Economic Rehabilitation Law;

"Official Receiver" – the Official Receiver as defined in the Insolvency and Economic Rehabilitation Law.

Methods of Winding Up

342c.

[Amendment: 5778]

The winding up of a Company pursuant to the provisions of this Part may be effected in one of the following ways:

(1)winding up by the Court;

(2)voluntary winding up.

Relationship Between Winding-Up Proceedings and Insolvency Proceedings

342d.

[Amendment: 5778]

(a)Where insolvency proceedings are being conducted in respect of a Company, winding-up proceedings in respect of that Company pursuant to this Part shall not be commenced.

(b)Where winding up of a Company by the Court pursuant to Chapter II has commenced, and the Court finds that the Company is insolvent, the Court may order the cessation of the winding-up proceedings and the continuation of proceedings pursuant to the Insolvency and Economic Rehabilitation Law, in such manner as it shall direct.

(c)Where voluntary winding up of a Company pursuant to Chapter III has commenced, and the trustee finds that the Company is insolvent, the trustee shall notify the shareholders and creditors of the Company accordingly, and if the conditions for filing an application for an order opening proceedings pursuant to the Insolvency and Economic Rehabilitation Law are met – the trustee shall file, on behalf of the Company, an application for an order opening proceedings.

(d)Nothing in the winding-up proceedings of a Company pursuant to this Part shall derogate from the possibility of commencing insolvency proceedings in respect of it; where insolvency proceedings are commenced in respect of a Company after the commencement of proceedings for its winding up pursuant to this Part, the Court shall order the termination of the winding-up proceedings and the continuation of the insolvency proceedings, in such manner as it shall direct.

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Chapter II: Winding Up by the Court

Competent Court

342e.

[Amendment: 2018]

The court competent to wind up a Company shall be the District Court within whose jurisdiction the Company is registered, or in which its principal place of business or assets is located.

Grounds for Winding Up by the Court

342f.

[Amendment: 2018]

The winding up of a Company by the court pursuant to this Chapter may occur on any one of the following grounds:

(1)The Company has passed a special resolution for its winding up by the court;

(2)The Company has not commenced its business within one year after its registration, or has suspended its business for a period of one year;

(3)The court has found that it is just and equitable to wind up the Company.

Persons Entitled to Apply for Winding Up

342g.

[Amendment: 2018]

(a)The following persons are entitled to submit to the court an application for a winding-up order in respect of a Company pursuant to this Chapter (in this Chapter – a winding-up order):

(1)The Company;

(2)A shareholder.

(b)The Attorney General may submit to the court an application for a winding-up order if the Attorney General is of the opinion that it is just and equitable that the Company be wound up.

Application for a Winding-Up Order

342h.

[Amendment: 2018]

(a)An application for a winding-up order shall be submitted to the court in the manner prescribed by the Minister and shall include the particulars prescribed by the Minister, including, inter alia, particulars relating to the Company's assets, its debts, and pending legal proceedings to which the Company is a party.

(b)The applicant shall attach to an application for a winding-up order an affidavit verifying the facts upon which the application is based; the Minister may prescribe additional documents that the applicant must attach to the application for the purpose of establishing the conditions for its submission.

Publication of Notice of Application and Dispatch of Copy Thereof

342i.

[Amendment: 2018]

(a)A person who submits an application for a winding-up order shall publish a public notice of the submission of the application, in the manner and at the time prescribed by the Minister; such publication shall include information regarding the date of the hearing on the application and the final date for submission of objections to the application.

(b)Where an application for a winding-up order has been submitted by a person other than the Company, the applicant shall send a copy thereof to the Company immediately after its submission.

(c)Any person liable to be affected by the granting of a winding-up order is entitled to obtain from the applicant a copy of the application for a winding-up order.

Submission of Objection to Application

342j.

[Amendment: 2018]

(a)A person liable to be affected by the granting of a winding-up order is entitled to submit to the court an objection to the application for a winding-up order.

(b)The Minister shall prescribe provisions regarding the submission of the objection, including provisions regarding the particulars to be included therein, the time for its submission, and the manner of its service.

Decision on Application for a Winding-Up Order

342ja.

[Amendment: 2018]

Where the court has found that a ground for winding up the Company exists pursuant to Section 342f, the court may grant a winding-up order in respect thereof.

Consequences of a Winding-Up Order

342jb.

[Amendment: 2018]

Upon the granting of a winding-up order –

(1)The court shall appoint a trustee to implement the winding-up proceedings in accordance with the provisions of Section 342n;

(2)Proceedings against the Company shall be stayed as provided in Section 29(1) and (3) to (5) of the Insolvency and Economic Rehabilitation Law, unless the court has ordered otherwise with respect to all or some of the proceedings; the provisions of Sections 31(a) and 32 of the Insolvency and Economic Rehabilitation Law shall apply, with the necessary modifications, with respect to the stay of proceedings pursuant to this paragraph; nothing in the provisions of this paragraph shall operate to delay the realization of an asset subject to a fixed charge and the crystallization of a floating charge created to secure the repayment of the Company's debts prior to the granting of the winding-up order, or to delay the transfer of possession of an asset subject to a retention of title from the Company to the owner of the asset.

Notice of Winding-Up Order to Registrar and Public Notice

342jc.

[Amendment: 2018]

(a)Immediately upon the granting of a winding-up order, the trustee shall send a copy thereof to the Registrar, and the Registrar shall record a notation accordingly.

(b)A notice of the granting of a winding-up order shall be published to the public in the manner and at the time prescribed by the Minister, and the court may order that notice of the granting of the order be served upon such persons as it may direct and in such manner as it may direct.

Trustee – Appointment, Functions and Powers in Winding Up by the Court

342jd.

[Amendment: 2018, 2019-2, 2020, 2021]

(a)The provisions of Section A of Chapter VI of Part 2 of the Insolvency and Economic Rehabilitation Law shall apply to the appointment of a trustee by the court, with the following modifications:

(1)The court may appoint a trustee who is not drawn from the list of trustees compiled pursuant to Section 37 of that Law, if the court has found that such appointment is justified in the circumstances of the matter;

(2)The Company and a shareholder, as well as the Attorney General if the Attorney General submitted the application for a winding-up order, are entitled to propose candidates for the position of trustee;

(3)The trustee's remuneration shall be determined in accordance with the provisions pursuant to Section 39 of that Law, with the necessary modifications; however, the Minister may prescribe special provisions regarding the remuneration of a trustee appointed pursuant to this Chapter;

(4)The Official Receiver for Insolvency and Economic Rehabilitation Proceedings shall publish, on an ongoing basis on its website, the names of trustees appointed by the court pursuant to this Chapter.

(b)The trustee shall act as expeditiously as possible to complete the winding-up proceedings of the Company in accordance with the provisions of this Chapter, including –

(1)Adjudicating on proof of debt claims;

(2)Acting to collect and administer the assets of the winding-up estate;

(3)Paying the Company's debts and acting to distribute the remainder among the shareholders.

(c)Where a trustee has been appointed pursuant to this Section, the provisions of Section B of Chapter VI of Part 2 of the Insolvency and Economic Rehabilitation Law that apply with respect to a corporation in respect of which an order opening proceedings directing its winding up has been granted, shall apply, with the necessary modifications.

(d)Where the trustee finds, in the course of the winding-up proceedings, that the Company is insolvent, the trustee shall notify the court accordingly and shall act in accordance with the court's directions, as provided in Section 342d(b).

Application of Provisions Regarding Winding-Up Proceedings by the Court

342if.

[Amendment: 2018, 2024-2]

The provisions pursuant to the Insolvency and Economic Rehabilitation Law, as detailed below and with the necessary modifications, shall apply to winding-up proceedings by the court pursuant to this Chapter:

(1)The provisions of Chapter A of Part 4 of that Law, as well as Regulations pursuant to that Chapter, shall apply to proof of debt claims and their approval, unless otherwise prescribed with respect thereto in Regulations pursuant to Section 342nd(1) in fine;

(2)With respect to the inclusion of assets in the winding-up estate, the provisions of Sections 216(1) and 218 of that Law shall apply;

(3)The collection and administration of the Company's assets by the trustee shall be carried out pursuant to Chapter C of Part 4 of that Law;

(4)The realization of the Company's assets by the trustee shall be carried out pursuant to Section 227 of that Law.

Payment of Winding-Up Expenses and Company's Debts to Creditors

342ig.

[Amendment: 2018]

(a)After the completion of the collection of all the Company's assets and the realization of those assets which, in the trustee's opinion, are to be realized, the trustee shall pay all of the following:

(1)Expenses incurred in connection with the actions of the trustee or those acting on the trustee's behalf in the framework of the winding-up proceedings, including fees and the trustee's remuneration;

(2)The Company's debts to creditors whose proof of debt claims have been approved by the trustee.

(b)Prior to paying the Company's debts to creditors, the trustee shall publish notice of the intention to do so in the manner prescribed by the Minister, and shall notify all those who have submitted proof of debt claims that have not yet been adjudicated upon and have not substantiated their claims to the trustee's satisfaction, of the intention to pay the Company's debts, and shall allow them a period of time to substantiate their claims.

Shareholders' Right to Surplus

342jg.

[Amendment: 2018]

Assets remaining after payment of the expenses of the winding-up proceedings and the Company's debts to creditors as provided in Section 342p, shall be distributed among the shareholders of the Company in accordance with their rights in the Company.

Interim Payments

342jh.

[Amendment: 2018]

(a)Notwithstanding the provisions of Sections 342p and 342q, the trustee, with the approval of the court, may pay monies that have accumulated in the winding-up estate to creditors or shareholders even before the completion of the collection of all the Company's assets and the realization of assets which, in the trustee's opinion, are to be realized, if the trustee is of the opinion that doing so will not prejudice the proper conduct of the winding-up proceedings.

(b)The provisions of Sections 239 and 241 of the Insolvency and Economic Rehabilitation Law shall apply, with the necessary modifications, to interim payments pursuant to subsection (a).

Right to Apply to the Court

342ji.

[Amendment: 2018]

A shareholder or creditor may apply to the court with a request that the court determine any question relating to that person's rights in the winding-up proceedings.

Powers of the Court

342k.

[Amendment: 2018]

In winding-up proceedings pursuant to this Chapter, the court shall be vested with all the powers vested in the court pursuant to Sections 279, 281 to 285, and 289 to 292 of the Insolvency and Economic Rehabilitation Law, with the necessary modifications.

Joinder of the Official Receiver for Insolvency and Economic Rehabilitation Proceedings

342ka.

[Amendment: 2018]

The court may order the joinder of the Official Receiver for Insolvency and Economic Rehabilitation Proceedings to winding-up proceedings pursuant to this Chapter, if the court is of the opinion that this is required for the purpose of safeguarding the public interest and the regularity of the proceedings; where the court has so ordered, the Official Receiver for Insolvency and Economic Rehabilitation Proceedings shall be vested with the powers vested in the Official Receiver pursuant to Part 6 of the Insolvency and Economic Rehabilitation Law, with the necessary modifications.

Cancellation of a Winding-Up Order

342kb.

[Amendment: 2018]

(a)The court may, at any time after a winding-up order has been granted, upon application by the Company or a shareholder, order the cancellation of the winding-up order, if the court has found that there is no justification in the circumstances of the matter to continue the winding-up proceedings of the Company.

(b)The court may stay the cancellation of the winding-up order in order to allow the re-imposition of attachments that were cancelled upon the granting of the order pursuant to Section 342l(2).

(c)The cancellation of a winding-up order does not affect the validity of any sale, transfer, payment, or other legal act performed lawfully prior to the cancellation.

(d)Where the court has decided to cancel the winding-up order, the trustee shall send to the Registrar a copy of the decision, and the Registrar shall delete the entry regarding the winding-up order.

Completion of Winding Up, Dissolution of Company, and Termination of Trustee's Tenure

342kc.

[Amendment: 2018]

(a)Upon the completion of the trustee's functions, the trustee shall submit to the court and to the shareholders a summary report of the trustee's activities.

(b)Upon the court's satisfaction that the winding up of the Company has been completed, the court shall order, by order, the dissolution of the Company; from the date of the granting of the order, the Company shall be dissolved.

(c)The court shall direct how the Company's documents referred to in Section 124 and the trustee's documents are to be dealt with after the dissolution of the Company, provided that they shall be preserved for a period of not less than seven years.

(d)Immediately upon the granting of the dissolution order, the trustee shall send a copy thereof to the Registrar, and the Registrar shall register the fact of the dissolution.

(e)Upon the court's satisfaction that the dissolution has been registered by the Registrar, the court shall order the termination of the trustee's tenure.

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