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Securities Law Client Update 

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June 29 2017

The Israel Securities Authority is Promoting Legislation to Allow the Listing on the TASE of Dual-Listed Companies with Multiple Classes of Shares

The Israel Securities Authority (ISA) has recently published a proposed amendment to the Israel Securities Law which would enable a company – whether Israeli or non-Israeli – whose shares are listed for trade on a stock exchange outside Israel to also list for trading on the Tel-Aviv Stock Exchange (TASE) even if the listed company’s share capital includes more than one class of shares.  In that context, we note that many global leading stock exchanges permit listed companies to have a share capital that includes more than one class of shares, which provide for different voting rights and dividend distribution rights.

Based on the current legal status, Section 46B of the Securities Law prohibits the listing of a company on the TASE if the company has more than one class of shares.  Accordingly, public companies traded on leading global stock exchanges – such as NASDAQ and the NYSE – were prevented from “dual listing” on the TASE if their share capital had more than one class of shares issued to shareholders. 

The ISA is now proposing to broaden and validate its practice in the legislation – such practice being to ease up on the requirement that a dual listed company have a single share capital structure.  For example, with respect to dual-listed companies, the ISA interpreted the single class share capital requirement to apply only with respect to actually issued share capital and not to the authorized and unissued share capital.  The reason for relaxing the approach is to encourage the listing of public companies, whether Israeli or non-Israeli, whose shares are listed on a stock exchange outside of Israel to list on the TASE and develop it as an attractive trading exchange.  The approach is justified from a substantial point of view in light of the fact that the structure of the share capital of a company listed on a stock exchange outside of Israel has already been taken into account in the regulatory framework applicable to the company traded abroad.

The proposed amendment to the Securities Law provides that a company with shares listed on a stock exchange outside of Israel and which had more than one class of shares, will be permitted to list for trading on the TASE as a “dual listed” company, provided the class of shares listed for trade on the TASE is the most liquid class of shares traded on the stock exchange outside of Israel.

Comments on the ISA proposal are due by August 13, 2017.

Reference: Israel Securities Authority 'Proposal to Amend Section 46B of the Securities Law', June 26, 2017.
Disclaimer: This Newsletter is intended only to provide general updates to clients and for no other purpose. Nothing in this Newsletter constitutes any opinion or advice on the subject matter dealt with therein. For any advice or opinion, clients are advised to approach the relevant lawyer at Naschitz, Brandes Amir & Co.

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Edited by Dr. Sharon Yadin, Adv.
English version by Adv. Helen Raziel