Translation Notice — This is an English translation of a Hebrew law and may contain inaccuracies. In any dispute or legal matter, the original Hebrew text as published in Reshumot (ספר החוקים) is the sole authoritative and legally binding version.
Law
Companies Law, 5759-1999
חוק החברות
Section C: Registration of a Company as a Defaulting Company
Registration of a Company as a Defaulting Company
362a.
[Amendment: 2009, 2011-4]
(a)Without derogating from the provisions under Section B, if the Registrar has reasonable grounds to believe that a company or a foreign company has not paid a fee or other payments that it is obligated to pay pursuant to Section 44(6), or that a private company or a foreign company that is not a reporting corporation has violated an obligation to submit an annual report pursuant to the provisions of Sections 141 or 348, as applicable, the Registrar may record in the register maintained by him with respect to that company, in accordance with the provisions of this Law, that the company has violated such an obligation (in this Section – a "defaulting company").
(b)The Registrar shall record in the register, with respect to a company as referred to in subsection (a), a warning of his intention to register it as a defaulting company, and shall indicate therein the date of its registration; if 30 days have elapsed from the date of registration of the warning and the company has not remedied the violation, it shall be registered in the register as a defaulting company; the Registrar shall send to the address of the company's registered office a notice of the registration of the warning.
(c)The following provisions shall apply to a defaulting company:
(1)The Registrar may refuse –
(a)to register any of the actions listed in Section 40, with respect to the defaulting company; the provisions of this sub-paragraph shall not apply in respect of a foreign company;
(b)to register, in accordance with the provisions of the Companies Ordinance [New Version], 5743–1983, a charge over the assets of the defaulting company and a charge in its favor, as well as to amend the registration of such a charge or to cancel a charge registered over the assets of the defaulting company; if the Registrar has refused to register, amend, or cancel such a charge, as applicable, the documents submitted in that regard shall be returned with an indication of the reason for their return;
(c)to register a company in which a shareholder is one of the following:
(1)the defaulting company;
(2)a controlling shareholder of the defaulting company; for this purpose, "controlling shareholder" means a person who is registered in the register as a holder of fifty percent or more of the issued share capital of the defaulting company at the time of registration of a warning with respect to it as referred to in subsection (b), and a person so registered in the register at the time of submission of the application for registration of the company;
(3)a director of the defaulting company who has not paid a monetary sanction that he is required to pay pursuant to Section 360 in respect of the violation on account of which the company was registered as a defaulting company;
(d)to carry out the actions enumerated in Section 323(3) to (5) if one or more of the merging companies is a defaulting company;
(2)the Registrar of Pledges appointed pursuant to the Pledge Law, 5727–1967, may refuse to register a pledge in favor of the defaulting company and may also refuse to amend the registration of such a pledge.
(d)If a company has remedied the violation on account of which a warning was registered against it or on account of which it was registered as a defaulting company, in accordance with the provisions of subsection (b), the Registrar shall delete the registration; however, if a company registered as a defaulting company has committed additional violations as referred to in subsection (a), in respect of which the Registrar sent it a notice to its registered address prior to the said remedy, the Registrar shall not delete that registration unless the company has remedied all of the said violations.
Regulations
363.
The Minister may promulgate Regulations for the implementation of this Chapter.
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Contact Us →Section D: Imposition of a Financial Sanction by the Israel Securities Authority
Imposition of a Financial Sanction by the Israel Securities Authority
363a.
[Amendment: 2011-3, 2011-4]
(a)In this Section, "the base amount" means the following, as applicable:
(1)with respect to a company — the amount set forth in item 1 of the Sixth Schedule to the Securities Law;
(2)with respect to an individual — the amount set forth in item 5 of the Sixth Schedule to the Securities Law.
(b)Where a person has violated a provision of the provisions under this Law, as set out below, in connection with a company that is a reporting corporation, the Israel Securities Authority may impose upon that person a financial sanction in accordance with the provisions of this Section, in the base amount:
(1)the company has not determined the minimum required number of directors on the board of directors who must possess accounting and financial expertise, contrary to the provisions of Section 92(12);
(2)the company has no serving chairperson of the board of directors, contrary to the provisions of Section 94(a), for more than 60 days;
(3)the general manager, a relative thereof, or a person directly or indirectly subordinate to the general manager serves as chairperson of the board of directors, contrary to the provisions of Section 95(a);
(4)the chairperson of the board of directors serves in another position in the company or in a corporation under its control, contrary to the provisions of Section 95(b);
(5)the company has no serving audit committee, contrary to the provisions of Sections 114 and 115, for more than 90 days;
(6)the company has no serving general manager, contrary to the provisions of Section 119, for more than 90 days;
(7)the company has no serving internal auditor, contrary to the provisions of Section 146, for more than 90 days;
(8)a director or officer who has been convicted of an offence serves in the company, contrary to the provisions of Section 226 or Section 251a; provided, however, that no financial sanction shall be imposed on the appointing party or on the company if the director or officer did not notify the appointing party or the company, as applicable, of the conviction;
(9)a director or officer whose appointment has been prohibited by an administrative enforcement committee serves in the company, contrary to the provisions of Section 226a; provided, however, that no financial sanction shall be imposed on the appointing party or the company if the director or officer did not notify the appointing party or the company, as applicable, of the prohibition;
(10)the company does not have at least two serving external directors, contrary to the provisions of Section 239(a), for more than 90 days, and with respect to first external directors as referred to in Section 242 — for more than 90 days from the last date for convening a general meeting pursuant to that Section;
(11)in a company where, at the time of appointment of an external director, all members of the board of directors are of the same sex, an external director of the other sex has not been appointed, contrary to the provisions of Section 239(d);
(12)the company does not have a serving external director with accounting and financial expertise, contrary to the provisions of Section 240(a1)(1), for more than 90 days;
(13)a committee authorized to exercise any of the powers of the board of directors does not have at least one serving external director, contrary to the provisions of Section 243.
(c)Notwithstanding the provisions of subsection (b), no financial sanction shall be imposed for a violation of paragraphs (5), (10), and (12) of that subsection if the violation results from the failure to appoint an external director due to the absence of the majority required for appointment at the general meeting.
(d)In counting the days under this Section, the days required for the approval of appointments by any person supervising the company under any law shall not be included.
Continuing Violation and Repeated Violation
363b.
[Amendment: 2011-3]
(a)In the case of a continuing violation, one-fiftieth of the financial sanction shall be added thereto for each day on which the violation continues.
(b)In the case of a repeated violation, an amount equal to one-half of the financial sanction that could have been imposed had it been a first violation shall be added to such financial sanction; for this purpose, "repeated violation" means a violation of a provision from among the provisions set out in Section 363a(b), occurring within two years of a prior violation of the same provision for which the Israel Securities Authority imposed a financial sanction on the violator pursuant to this Section.
Application of Provisions
363c.
The provisions under Sections 52p through 52r, 52t through 52aa, and 56h of the Securities Law shall apply to a financial sanction under this Section, with the necessary modifications.
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Contact Us →Chapter V: Public Company or Debenture Company Whose Shares or Debentures Are Traded Outside Israel
Limitation of Application
364.
[Amendment: 2011-4]
(a)The Minister may prescribe, after consultation with the Securities Authority, that the provisions of this Law applicable to public companies or to private companies that are debenture companies shall not apply, in whole or in part, to public companies or to private companies as aforesaid, whose shares or debentures, as the case may be, were offered to the public outside Israel only, or which are listed on a stock exchange outside Israel only, whether generally or by categories, all as the Minister shall prescribe.
(b)The Minister may prescribe, after consultation with the Securities Authority, that the provisions of this Law applicable to public companies or to private companies that are debenture companies shall not apply, in whole or in part, to public companies or to private companies as aforesaid, whose shares or debentures, as the case may be, are listed on a stock exchange in Israel and on a stock exchange outside Israel, inter alia in order to prevent a conflict between foreign laws or between the rules prescribed by the stock exchange outside Israel and the provisions of this Law.
Reporting Obligations
365.
[Amendment: 2005, 2011-4]
(a)A public company or a private company that is a debenture company whose shares or debentures, as the case may be, were offered to the public outside Israel only, or which are listed for trading on a stock exchange outside Israel only, shall submit reports to the Registrar of Companies in accordance with the provisions under this Law applicable to a company that is not a reporting corporation, with such modifications as the Minister shall prescribe.
(b)The Minister may, after consultation with the Securities Authority, prescribe that subsection (a) shall not apply to companies referred to therein, either generally or by categories, as the Minister shall prescribe; where the Minister has so prescribed, the provisions under Sections 142 to 145 shall apply to those companies.
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Contact Us →Chapter VA: Limitation of Application to Bond Companies
Limitation of Application
365a.
[Amendment: 2011-4]
The Minister may determine, after consultation with the Securities Authority, that the provisions of this Law applicable to bond companies shall not apply, in whole or in part, to a class of bond companies as the Minister shall determine.
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Contact Us →Chapter VI: Regulations
Implementation and Regulations
366.
(a)The Minister may prescribe Regulations for the implementation of this Law.
(b)Regulations under this Law require approval by the Constitution, Law and Justice Committee of the Knesset.
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Contact Us →Part 10: Repeal, Transitional Provisions, Application and Commencement
Repeal
367.
(a)The Companies Ordinance is hereby repealed, except for —
(1)Sections 164 to 201, 244 to 367, 370 to 382, as well as Sections 1 and 394 insofar as they relate to secured debentures, charges and winding up, both with respect to companies incorporated before the commencement of this Law and with respect to companies incorporated under this Law;
(2)Section 33, which shall continue in force with respect to companies that received an exemption under Section 32 before the commencement of this Law;
(3)Section 369, which shall continue in force with respect to companies that were struck off in accordance with Section 368 before the commencement of this Law;
(4)The provisions and conditions regarding amendment of the memorandum — with respect to a company to which Section 24 of this Law applies;
(5)Section 115a, which shall apply with respect to resolutions of the general meeting required under the Companies Ordinance.
(b)The provisions listed in subsection (a) shall be interpreted, insofar as possible, in light of the provisions of this Law.
Transitional Provision Regarding Application of Articles of Association in Table A
368.
(a)The provisions of Sections 23 to 29, 51, 58 and 91 of the Second Schedule to the Companies Ordinance shall be deemed to be included in the articles of association of a company incorporated before the commencement of this Law, if those provisions applied to it on the eve of the commencement of this Law pursuant to the provisions of Sections 10 or 11 of the Companies Ordinance as worded on the eve of the commencement of this Law, and this shall remain so as long as the articles of association have not been amended pursuant to Section 20.
(b)The articles of association of a company incorporated before the commencement of this Law shall be deemed to include a provision to the effect that the chairperson of the board of directors shall not have a casting vote, as stated in Section 107, unless otherwise provided in the articles of association, and this shall remain so as long as the articles of association have not been amended pursuant to Section 20.
Transitional Provision Regarding Shares of a Parent Company Held by a Subsidiary
369.
(a)The provision of Section 309(b) shall not affect the voting rights attached to shares in a parent company that were acquired by a subsidiary or by another corporation controlled by the parent company before the commencement of this Law, insofar as such voting rights were conferred upon them by law.
(b)Where shares were acquired as referred to in subsection (a), and after the commencement of this Law a subsidiary or another corporation controlled by the parent company acquires additional shares of the same class and thereafter a portion of the shares is sold, then for the purposes of the voting rights attached to the remaining shares, those shares acquired after the commencement of this Law shall be deemed to have been sold first.
Application to a Company Limited by Guarantee
370.
A company that, on the eve of the commencement of this Law, was a company limited by guarantee, as defined in the Companies Ordinance as worded on the eve of the commencement of this Law, and had no share capital, shall be subject to the provisions of this Law, and its members shall be deemed to be shareholders in a company having a share capital with no par value.
Transitional Provision Regarding Internal Auditor
371.
A person who served as an internal auditor in a public company on the eve of the commencement of this Law pursuant to an approval under Section 3(b) of the Internal Audit Law, 5752–1992, shall be permitted to continue serving as internal auditor in that same company.
Public Director
372.
A public director appointed pursuant to the provision of Section 96b of the Companies Ordinance as worded on the eve of the commencement of this Law shall be deemed, for the purposes of Chapter I of Part 6, to be an external director; however, with respect to the duration of tenure and the renewal of tenure, the provisions of the Companies Ordinance as worded on the eve of the commencement of this Law shall apply.
373.
[Amendment: Publications 5764]
Commencement
377.
[Amendment: 5763, Publications 5764, Publications 5764-2]
This Law shall commence, except for the sections listed below, on the 25th of Shevat 5760 (1 February 2000):
(1)Sections 87 to 89 shall enter into force following the publication of regulations for their implementation, and on the date to be prescribed in those regulations;
(2)Sections 143 and 145 shall enter into force upon the expiration of three years from the date of publication of this Law or at an earlier date to be prescribed by the Minister and the Minister of Finance, provided that provisions regarding electronic reporting pursuant to the Securities Law have been prescribed; the date of entry into force of Sections 143 and 145 shall be published in advance in the Official Gazette;
(3)Section 36(a1) of the Securities Law, as worded in Section 373 of this Law, shall enter into force on the date of entry into force of Sections 143 and 145 of this Law, as referred to in paragraph (2).
Publication
378.
This Law shall be published in the Official Gazette within 45 days of the date of its adoption by the Knesset.
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