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 I: Audit Committee
Appointment of the Committee
114.
[Amendment: 2011-4]
The board of directors of a public company or a private company that is a bond company shall appoint from among its members an audit committee, and the provisions of Chapter VIII shall apply to it, with the necessary modifications.
Members of the Committee
115.
[Amendment: 2011-3, 2014-5]
(a)The number of members of the audit committee shall not be fewer than three; all external directors shall be members thereof, and the majority of its members shall be independent directors.
(b)
(1)The following shall not be members of the audit committee: the chairperson of the board of directors, and any director employed by the company or employed by a controlling shareholder thereof or by a corporation controlled by such a controlling shareholder, a director who provides services on a permanent basis to the company, to a controlling shareholder thereof, or to a corporation controlled by such a controlling shareholder, as well as a director whose livelihood depends primarily on the controlling shareholder.
(2)The provisions of paragraph (1) shall not apply to a State employee with respect to membership on the audit committee of a government company or a government subsidiary company, provided that the Minister responsible for the company's affairs is not the Minister responsible for the ministry in which the said State employee is employed.
(c)The controlling shareholder or a relative thereof shall not be a member of the audit committee.
(d)The chairperson of the audit committee shall be an external director, or a State employee as referred to in subsection (b)(2) who has not served as chairperson of the committee for more than nine years.
(e)A person who is not permitted to be a member of the audit committee shall not be present at committee meetings during deliberations or during the adoption of decisions, unless the chairperson of the committee has determined that such person is required for the purpose of presenting a particular matter; however —
(1)an employee of the company who is not a controlling shareholder or a relative thereof may be present at committee meetings during deliberations if the committee so requests, provided that the decision is adopted without that person's presence;
(2)without derogating from paragraph (1), the legal counsel and the secretary of the company, who are not a controlling shareholder or a relative thereof, may be present during deliberations and during the adoption of decisions, if the committee so requests.
(f)Notwithstanding the provisions of subsection (e), with respect to an audit committee serving as a committee for the examination of financial statements pursuant to Section 171(e), the provisions under that section shall apply during the deliberation of financial statements.
Notice of Meetings
116.
(a)The internal auditor of the company shall receive notices of the convening of audit committee meetings and shall be entitled to participate in them.
(b)The internal auditor may request the chairperson of the audit committee to convene the committee for deliberation on a matter specified in the request, and the chairperson of the audit committee shall convene it within a reasonable time from the date of the request, if the chairperson sees reason to do so.
(c)Notice of the convening of an audit committee meeting at which a matter relating to the audit of financial statements is raised shall be provided to the auditing accountant, who shall be entitled to participate therein.
Quorum for Adoption of Decisions in the Audit Committee
116a.
[Amendment: 2011-3]
The quorum for deliberations and for the adoption of decisions in the audit committee shall be a majority of the committee's members, provided that the majority of those present are independent directors and at least one of them is an external director.
Functions of the Audit Committee
117.
[Amendment: 2011-3, 2011-4, 2014-2, 2014-5]
The following are the functions of the audit committee:
(1)to identify deficiencies in the business management of the company, inter alia through consultation with the internal auditor of the company or with the auditing accountant, and to propose to the board of directors ways to remedy them; if the audit committee has identified a deficiency that constitutes a material deficiency, it shall hold at least one meeting with respect to the deficiency in question, in the presence of the internal auditor or the auditing accountant, as the case may be, and without the presence of office holders of the company who are not members of the committee; notwithstanding the foregoing in this section, an office holder may be present for the purpose of presenting a position on a matter within the scope of that person's responsibility, if the committee so requests;
(1a)to decide, on the basis of reasons to be detailed, with respect to actions referred to in Section 255, whether they are material actions or non-material actions, and with respect to transactions referred to in Section 270(1), (4) and (4a), whether they are extraordinary transactions or non-extraordinary transactions, for the purpose of their approval under this Law; the audit committee may so decide with respect to a category of actions or transactions, according to criteria it shall determine in advance once a year;
(1b)to determine, with respect to transactions referred to in Section 270(4) or (4a), even if they are not extraordinary transactions, a requirement to conduct a competitive process under the committee's supervision or that of a person it designates for that purpose, and in accordance with criteria it shall determine, or to determine that other procedures established by the audit committee shall be carried out, prior to entering into such transactions, all in accordance with the type of transaction; the committee may determine criteria for this purpose in advance once a year;
(2)to decide whether to approve actions and transactions requiring approval of the audit committee pursuant to Sections 255 and 268 through 275;
(2a)to determine the manner of approval of non-negligible transactions, including determining categories of such transactions that shall require the approval of the audit committee; for this purpose, a "non-negligible transaction" means a transaction referred to in the opening clause of Section 270(4) or the opening clause of Section 270(4a), with respect to which the audit committee has decided pursuant to the provisions of paragraph (1a) that it is a non-extraordinary transaction and has further classified it as a non-negligible transaction; the audit committee may decide on such classification with respect to a category of transactions, according to criteria it shall determine in advance once a year;
(3)in a company in which the work plan of the internal auditor is approved by the board of directors pursuant to Section 149 — to examine the work plan prior to its submission for approval by the board of directors and to propose amendments thereto;
(4)to examine the internal audit system of the company and the performance of the internal auditor, as well as whether the internal auditor has at their disposal the resources and tools necessary for the fulfillment of their duties, having regard, inter alia, to the special needs and size of the company;
(5)to examine the scope of work of the auditing accountant and the auditing accountant's remuneration, and to bring its recommendations before whoever determines the remuneration pursuant to Sections 155 and 165; if the company has appointed a committee for the examination of financial statements pursuant to Section 171(e), the committee may determine that the examination pursuant to this paragraph shall be carried out by that committee;
(6)to establish arrangements regarding the manner of handling complaints by employees of the company in connection with deficiencies in the management of its business and regarding the protection to be afforded to employees who have filed such complaints.
Audit Committee in a Private Company
118.
[Amendment: 2011-3, 2011-4]
(a)In a private company that is not a bond company, the board of directors may appoint from among its members an audit committee, and the provisions of Section 115 shall not apply; however, a director employed by the company or providing it with services on a permanent basis shall not serve thereon, and a controlling shareholder or a relative thereof shall not be the chairperson of the committee; the functions of the audit committee shall be as set out in Section 117.
(b)An audit committee shall not be appointed in a private company that is not a bond company, whose function is as referred to in Section 117(2), if the majority of its members or their relatives are substantial shareholders.
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Contact Us →Section J: Compensation Committee
Appointment of Compensation Committee
118a.
[Amendment: 2013, 2016]
(a)The board of directors of a public company or a private company that is a bond company shall appoint from among its members a compensation committee (in this Law – the compensation committee).
(b)The number of members of the compensation committee shall not be less than three; all external directors shall be members thereof and shall constitute the majority of its members; and the remaining members shall be directors whose terms and conditions of office and employment are in accordance with the provisions prescribed pursuant to Section 244, and in a government company – in accordance with the provisions prescribed pursuant to Section 19 of the Government Companies Law, 5735–1975, as applicable; the chairperson of the committee shall be an external director.
(c)The provisions of Section H and Section 115(b) through (e) shall apply to the compensation committee, with the necessary modifications.
(d)An audit committee that satisfies the conditions set forth in subsection (b) may also serve as a compensation committee.
Functions of the Compensation Committee
118b.
[Amendment: 2013]
The functions of the compensation committee are:
(1)to recommend to the board of directors the compensation policy for officers, within the meaning thereof in Section 267a(a), and also to recommend to the board of directors, once every three years, regarding the approval of the continued validity of a compensation policy that was established for a period exceeding three years, as set forth in Section 267a(d);
(2)to recommend to the board of directors the periodic updating of the compensation policy and to examine its implementation;
(3)to decide whether to approve transactions with respect to terms of office and employment of officers that require the approval of the compensation committee pursuant to Sections 272, 273, and 275;
(4)to exempt a transaction from the approval of the general meeting, as set forth in Section 272(c1)(3).
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Contact Us →Chapter IV: The General Manager
Appointment of the General Manager
119.
[Amendment: 2011-4]
(a)A public company or a private company that is a bond company shall appoint a general manager, and may appoint more than one general manager.
(b)A private company that is not a bond company may appoint one or more general managers; if no general manager has been appointed, the company shall be managed by the board of directors.
Responsibility of the General Manager
120.
The general manager is responsible for the day-to-day management of the company's affairs within the framework of the policy established by the board of directors and subject to its directives.
Powers of the General Manager
121.
[Amendment: 2005, 2011-3, 2011-4, 2016]
(a)The general manager shall have all management and executive powers that have not been vested by this Law or by the articles of association in another organ of the company, and shall be subject to the supervision of the board of directors.
(b)The general manager may, with the approval of the board of directors, delegate any of his powers to a person subordinate to him.
(c)Notwithstanding the provisions of Section 95, the general meeting of a public company may resolve that, for periods each of which shall not exceed three years from the date of the resolution, the chairperson of the board of directors or his relative may be authorized to fulfill the role of general manager or to exercise his powers, and likewise that the general manager or his relative may be authorized to fulfill the role of chairperson of the board of directors or to exercise his powers, provided that one of the following is met:
(1)The majority of votes at the general meeting shall include at least a majority of the votes of shareholders who are not controlling shareholders of the company and who do not have a personal interest in the approval of the resolution and who participate in the vote; in counting the votes of such shareholders, abstentions shall not be taken into account; the provisions of Section 276 shall apply, with the necessary modifications, to any person who has a personal interest;
(2)The total votes against among the shareholders referred to in paragraph (1) did not exceed two percent of the total voting rights in the company.
(d)Notwithstanding the provisions of Section 95, the board of directors of a private company that is a bond company may resolve that, for periods each of which shall not exceed three years from the date of the resolution, the chairperson of the board of directors or his relative may be authorized to fulfill the role of general manager or to exercise his powers, and likewise that the general manager or his relative may be authorized to fulfill the role of chairperson of the board of directors or to exercise his powers, provided that approval therefor has been obtained from the audit committee.
(e)Notwithstanding the provisions of subsections (c) and (d), the Minister may, in consultation with the Israel Securities Authority, prescribe that a resolution pursuant to those subsections may be granted for periods exceeding three years, for types of companies and subject to conditions as he shall prescribe.
Duty to Report to the Board of Directors
122.
(a)The general manager is required to notify the chairperson of the board of directors of any extraordinary matter that is material to the company; if the company has no chairperson of the board of directors, or if the chairperson is prevented from fulfilling his role, the general manager shall give such notice to all members of the board of directors.
(b)The general manager shall submit to the board of directors reports on matters, at times, and to the extent that the board of directors shall determine.
(c)The chairperson of the board of directors may, at any time, on his own initiative or pursuant to a resolution of the board of directors, require reports from the general manager on matters relating to the company's business.
(d)If a notice or report by the general manager requires action by the board of directors, the chairperson of the board of directors shall convene, without delay, a meeting of the board of directors.
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Contact Us →Part 4: Corporate Administration
Chapter I: Registered Office and Digital Address
The Registered Office
123.
[Amendment: 2011-4]
(a)From the day a company is registered, it shall maintain a registered office in Israel, to which any notice to the company may be directed.
(b)Notice of the address of the registered office shall be delivered to the Registrar together with the application for registration of the company; notice of any change in the address of the registered office shall be delivered to the Registrar within fourteen days after the change; the Registrar shall register the address of the company's registered office.
(c)Service of a document on a company shall be effected by leaving it at the company's registered office as registered with the Registrar at the time of service, or by sending it thereto by post.
(d)Service of a document by the Companies Registrar on a company, or by the Securities Authority on a company that is a reporting corporation, may, notwithstanding the provisions of subsection (c), be effected by leaving it at a place where the Registrar or the Securities Authority, as the case may be, has been satisfied that the company actually conducts its business, or in another manner prescribed under the Securities Law.
The Digital Address
123a.
[Amendment: 2022]
(a)From the day a company is registered, it shall be required to have a digital address, one from each detail listed in the Fourth Schedule.
(b)Notice of a company's digital address as referred to in subsection (a) shall be delivered to the Registrar together with the application for registration of the company; notice of any change in such digital address shall be delivered to the Registrar within 14 days after the change.
(c)The Registrar shall register the digital address of which the company has given notice pursuant to the provisions of subsection (b), after compliance with the provisions of Section 3b(a)(1) and (3) of the Digital Communication with Public Bodies Law, and after verifying that the digital address is valid and operational.
(d)The Minister, with the approval of the Constitution, Law and Justice Committee of the Knesset, may, by Order, amend the Fourth Schedule.
Documents to Be Kept at the Registered Office
124.
Without prejudice to the provisions of any law, a company shall keep the following documents at its registered office:
(1)the articles of association of the company;
(2)minutes of general meeting proceedings as referred to in Section 90;
(3)minutes of board of directors meetings and its resolutions as referred to in Sections 103 and 108;
(4)minutes of board of directors committee meetings as referred to in Section 111;
(5)copies of the company's notices to its shareholders over the last seven years;
(6)the financial statements of the company as referred to in Section 171;
(7)the register of shareholders, and in a public company also the register of substantial shareholders, as referred to in Sections 127 and 128;
(8)the register of directors, as referred to in Section 224.
Manner of Keeping Documents
125.
A company may keep the aforementioned documents by electronic means, provided that those entitled to inspect them shall have the ability to obtain copies of the documents.
Obtaining Copies
126.
[Amendment: 2005]
(a)A person entitled to inspect the documents listed in Section 124 is entitled to receive a copy thereof in consideration of a payment not exceeding the company's expenses in respect of providing the copy alone.
(b)The Minister may prescribe maximum payment amounts.
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