A number of legislative amendments relating to the capital market have been promulgated recently, including:

  • Appointments of external directors who are not residents of Israel

This new amendment allows foreign residents to be appointed as external directors of Israeli companies. Therefore, Israeli companies operating predominantly outside of Israel may appoint external directors who are not residents of Israel, provided that the company's board of directors has approved that, considering the nature of the company's operations, the appointment of an external director who is not a resident of Israel is justified. The amendment also clarifies that such external directors, who are not residents of Israel, shall be entitled to attend meetings of the board of directors, but they must have an address in Israel for the purpose of service of process.

  • Interested-party transactions – more lenient provisions relating to approvals of officers' remuneration

Discretionary bonuses to officers subject to the CEO

The amendment rescinds the requirement to base variable components (bonuses) of the terms of office and employment of officers subject to the CEO on measurable criteria. This means that the board of directors and the remuneration committee are now allowed to exercise discretion when awarding the entire bonus to such officers. Since this amendment has far-reaching implications, companies should review their remuneration policies and their options with regard to amending them.

Renewal of the engagement with a company's CEO

Up until now, any renewal or extension of the terms of office and employment of a reporting company's CEO required a triple approval procedure – by the remuneration committee, by the board of directors and by the general meeting. The amendment specifies that a renewal or extension of this engagement will no longer require the approval of the company's general meeting, provided that the CEO's terms of employment have not been improved or provided that no substantive change in terms has been made compared to those approved in the previous engagement, and provided that the terms still comply with the company's remuneration policy.

Setting the wages of officers subject to the CEO

A CEO shall be able to approve an immaterial update in the terms of engagement with any officer subject to the CEO, provided that the update complies with the remuneration policy. Prior to this amendment, even immaterial updates had required the approval of the company's remuneration committee.

  • Connection between an external director and the company

The new amendment that has come into effect provides a solution for the instance whereby negligible connections are discovered between an external director and the company's controlling shareholder during the director's incumbency in the company. According to the amendment, business or professional connections will no longer constitute an interest that prevents the external director from continuing to hold office, under the following conditions: the connections are negligible for both the director and the company; the director attests that he/she did not know and could not have known about the interest arising and that he/she has no control over the existence or end of the interest; the audit committee has approved, based on the information issued to it, that the ties are negligible for both the director and for the company.

  • Announcements and advertisements about general meetings

The amendment to the Companies Regulations (Announcement and Advertisement of a General Meeting and a Class Meeting in a Public Company and the Addition of an Item to an Agenda) enables companies to advertise an announcement of a meeting being convened in conformity with the Companies Law on its website, in lieu of the previous requirement of advertising the announcement of the meeting in two daily newspapers. To dispel any doubt, we clarify that the obligation to advertise announcements in newspapers is still in effect pursuant to the Securities Law and the Securities Regulations; therefore, advertising announcements solely on the company's website and not in newspapers is not permitted pursuant to the Securities Law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.