Administrative Petition (Tel Aviv) 55852-05-25 Retail Minds Technologies Ltd. v. Israel Securities Authority

A petition concerning the Securities Authority's decision to declare a public company whose business activity has ceased to be a "shell company", a declaration that leads to a restriction on the tradability of its shares, and that an investor who wishes to include private activity in the remaining "stock exchange skeleton" will refrain from doing so.  However, there is no reason to intervene in the Authority's decision.  The circumstances of the case clearly demonstrate how important it is for the ISA to act as it did, to protect the investing public and the proper trading on the stock exchange.

Background

Public Company, "Envelope Company" and the Conservation List

1. The Petitioner (hereinafter: the Company) is a public company whose shares have been traded on the Tel Aviv Stock Exchange, since 2021, when it was called Quick Super Online Ltd. By April 2025, it was without a control core; On May 9, 2025, a tender offer for the majority of its shares was completed by Mr. Yarin Ben Simhon and Prof.  Shimon Gazundheit (hereinafter: the purchasers).  The purchasers are also the sole shareholders of a private company called Mobility Brands in a tax appeal (hereinafter: Mobility), which is engaged in the import and distribution of light transportation vehicles in Israel.  The purchasers will seek to integrate Mobility's activity into the Petitioner, against the allocation of shares on a significant scale, all subject to the acceptance of the petition.  The buyers were defined as "formal respondents" to the petition, even though they were the ones who set it in motion.
2. Respondent No. 2 is the TASE, which is responsible for trading in the securities registered with it, as provided in Section 46 of the Securities Law, 5728-1968 (hereinafter: the Securities Law).  Respondent 1 is the Israel Securities Authority (hereinafter: the Authority).  This is a general entrust for "safeguarding the interests of the investing public in securities, as set forth in this Law", including the Supervisor of the Stock Exchange (Sections 2 and 46 of the Securities Law).
3. A company that sought to go public has overcome the hurdle of the prospectus (the integrity of which is supervised by the ISA), the initial public offering has gone well, and it is requesting that its shares be listed for trading on the Tel Aviv Stock Exchange, subject to the rules and guidelines set out in accordance with the TASE Regulations. These regulations, by virtue of the provision of section 46 of the Securities Law, have the status of a statutory regulation (Civil Appeal 4275/94 The Tel Aviv Stock Exchange in Tax Appeal v.  T.  Management of the Torah Literature Database Ltd., IsrSC 50(5) 485, 507 (1997)).  The rules by virtue of which are intended for the purpose of "proper and fair management of the stock exchange" (section 46 of the Securities Law).  These rules relate, among other things, to the subject of securities trading, and conditions for limiting or suspending securities trading.  The Securities Law establishes the status of the ISA, inter alia, as the one that will "supervise the proper and fair management of the TASE" and hence the ISA's involvement in setting the rules of the TASE (Sections 46(d) and 48(a) of the Securities Law).
4. The fourth part of the TASE Regulations includes "Rules Regarding Temporary Suspension and Rules Regarding Suspension of Trading, Regarding Transfer to the Reserve List, and Regarding the Delisting of Securities from the Listing." While the shares of most companies on TASE are traded on the continuum system, TASE's computerized trading system that operates continuously, to the extent that their business activity, value or the percentage of public holdings in them cease to meet the minimum standards required by the rules, the shares may be transferred to the "Retention List": a list of securities that have been deducted from the main list, which are traded in multilateral trading only twice a day, at the beginning and end of the trading day. The rules in the fourth part of the articles of association also deal with the conditions for the return of the securities of the companies on the main list, in accordance with the grounds by virtue of which they found themselves on the preservation list in the first place.  The companies have a period of four years to meet the aforementioned conditions, otherwise the securities will be delisted from the listing.  The transfer of a company's shares to the preservation list detracts from the company's attractiveness, inter alia, because it is liable to lead to its delisting from the stock exchange and thus affect the value and liquidity of the shares (see: Civil Appeal 3417/16 Fineros Holdings in Tax Appeal v.  Goldstein, paragraph 7 (August 4, 2021)).  Hence the reluctance of the company's principals, usually (and for exceptions, see the Pineross case) that the company's shares be transferred to the preservation list.  The same is true of the Petitioner and its controlling shareholders here.
5. There are a number of different grounds for transferring to the preservation list: the value of the public's holdings in the company's shares; the rate of the public's holdings in the company's shares; the company has collected shares and redistributed them or made a large private allocation (over 75% of the company's capital); and more, inter alia, and this is the relevant cause for our case: a company that remains without real business activity generates actual or forceful Such a company constitutes what is formally referred to in the TASE rules as a "shell company", and informally - a "stock exchange shell" (and at least for the purpose of the hearing of this petition, the parties referred to these two as alternative concepts).
6. Such a publicly traded skeleton can be the result of the termination of a public company's business activity, when all it has left, if any, is its cash coffers. Insofar as it meets the definition of a "shell company" in the TASE Articles of Association, the company itself is supposed to report that it has become one, at which point its shares will be transferred to the preservation list.  However, if it does not do so, the cessation of activity in itself will not automatically lead to the cessation of trading in the company's shares on TASE's main list.  In such a situation, which the ISA does not consider to be proper, then anyone wishing to enter trading on the TASE through the 'back door' can have an interest in acquiring the remaining TASE skeleton, and injecting new activity into it, usually by way of a private allocation of a significant proportion of shares, in exchange for the introduction of activity, while significantly diluting the company's shareholders.  As for the public shareholders, it is possible that they will still prefer this acquisition of the TASE skeleton, in order to prevent the loss of the residual value of their shares, or perhaps in the hope that the activity that will be entered will yield future profits for the company and for them, among other reasons.  The continuation of trading in shares on the main list and not on the preservation list can therefore be of considerable benefit to both the entrepreneur and the existing shareholders.
7. The ISA, which has been following the issue of TASE skeletons for years, has identified many difficulties in the possible retention of inactive public companies when they continue to be traded on the TASE main list, like all other companies. These include, as described, concern about ineffective corporate disclosure and governance mechanisms, harm to the investing public, and harm to the stock exchange and through it to all investors, as a proper trading platform.  Introducing activity into the "stock exchange skeleton" as a way to circumvent the customary format of raising and listing for trading by means of a prospectus and compliance with the rules of listing for trading of a new company, contradicts the purposes of the listing rules, it believed.  Hence its position regarding the importance of transferring the shares for trading on the preservation list, a transfer that in itself does not prevent the possibility that an entrepreneur will seek to make a tender and merger offer, when the shares are already on the preservation list, knowing that then the company will be required to meet the criteria and timetables in the rules for returning the shares to the main list.
8. Against the background of the aforesaid, the amendments initiated and supervised by the ISA, as of 2016, came in Part IV of the TASE Regulations, and they deal with a "shell company".
9. A "shell company" is defined, in the one alternative to this term relevant to our case, as "a company that does not have, directly or indirectly, real business activity, which yields or is expected to generate income in the ordinary course of business that is not only financing income" (Section 1(d) of the TASE Guidelines for Part IV of the Articles of Association). When a company becomes a "shell company", it must immediately notify the public of its transformation.  If it has done so, then in accordance with Section 8(g) of the aforesaid Rules, the CEO of the TASE will transfer the securities to the preservation list.  In 2018 (it is reasonable to assume that since the ISA had difficulty getting an impression of a sufficiently vigorous approach of companies to declare themselves a shell company, and thus bring about the transfer of their shares to the preservation list), it was added in clause 8(g) of the TASE Rules that a notice by the company or the ISA regarding the fact that a company is a "shell company", each of which alone will establish an obligation for the TASE CEO to transfer the shares to the preservation list.  The transfer to the preservation list due to the transformation of the company into an envelope, as distinct from other grounds for transfer to the same list, is immediate (Section 2(b)(2) of the TASE Guidelines for Part IV).  It is clear that the very act of becoming a shell company, in view of its implications for the investing public, requires the submission of an immediate report to the public, and there is also no dispute that the Authority has the authority to instruct the company to publish the position of the Authority's staff regarding the transformation of the company into one, in an immediate report (section 36(e) of the Securities Law).  See in this regard: ISA Staff Position No. 104-17: "Obligation to Report and Update on Compliance with the Definition of a 'Shell Company'"; as well as questions and answers (responsa ) published by the Authority regarding the implementation of the directive (Appendix 3 to the Authority's response), and in particular Responsa 115.10 and 115.14.
10. As for the possibility of exiting the preservation list, within a period of 4 years, it is possible to do so: this will also be done in accordance with the TASE rules, which apply specifically to a company whose reason for entering the preservation list was that it was an envelope. The Petitioner argues here: onerous conditions, similar to those that seek to carry out an initial public offering, to the point of rendering this alternative irrelevant.  It is already important to emphasize: there is no doubt about the importance of the discussion in principle regarding the optimal suitability of the rules relating to the entry and exit of "shell companies" to the conservation list, but the starting point for our discussion will be that the rules are those that were enacted, and they have binding validity.
11. The Petitioner, in view of the inherent difficulty in the Court's intervention in the Authority's discretion, and since it apparently noted difficulties in her petition, sought to amend her petition, and to take the path of attacking the source of the Authority's authority to enact the rules that were enacted. This path, I made clear already when the amendment request was rejected, is not open to it (my decision of July 6, 2025).  In other words, the powers of the ISA and the TASE, their rights and duties, are as stated in the TASE Regulations.

Notice of the Authority's staff regarding the Petitioner's being a "shell company", the transfer of its securities to the Conservation List, and the Petition

12. As stated, the Petitioner's shares are traded on the Tel Aviv Stock Exchange. In the past, they were traded on the main list.  For some time now, its shares have been traded on the tradable list (a matter that was kept under wraps in the petition), even though according to the Petitioner, this is a list that is much easier to "extricate" than from the preservation list.  Beginning shortly after the petition was filed, and as a result of the decision of the authority that is the subject of the petition, the TASE CEO transferred the Petitioner's shares to the Conservation List.
13. In the background of the Authority's decision: In accordance with the Petitioner's semi-annual report from August 2024 (which was not attached to the Petition, but rather the Authority's Respondent attached it to its response), in the past the Petitioner engaged in joint activity with another, while conducting a certain online retail marketing and distribution activity. This agreement came to an end in 2023, although it was further agreed that the Petitioner's services would be provided until May 2024.  While the same report noted that business activity is supposed to continue until April 2026, it was not clarified what that activity was.  In practice, there is no dispute, the Petitioner did indeed cease to bring in additional income after the first half of 2024.  A similar conclusion of a possible cessation of activity, perhaps gradually, was also learned from a request submitted by the Petitioner in June 2024 (which was also not attached by the Petitioner, but rather by the Authority), for the court's approval of the distribution of the sum of ILS 40 million received against the cessation of activity, as a distribution that does not meet the profit test, all in accordance with the provisions of section 303 of the Companies Law, 5759-1999.  In the same application, it was assumed in a "conservative scenario" that the Petitioner would gradually cease its business activity until its full cessation in April 2026, and that by that date "no income is expected to derive to the Company".  It should be noted that the distribution was approved in the absence of concern about the company's solvency capacity.  About ILS 6 million remained in its coffers (p.  6, paras.  1-2 of the protégé).
14. What turned out to be the cessation of the Petitioner's real business activity in 2024 generated interest from two completely different parties: one, Mr. Ben Simhon, who owns 90% of Mobility's shares, and Prof. Gazundheit, who owns the rest of the shares in Mobility, was next to him.  The other factor - the Authority.  Ben Simhon approached the Petitioner's CEO at the time, Mr. Ofir Steinberg, and offered to purchase the Petitioner's shares, according to the claim, even while expressing interest in the company's technology (paragraph 7 of Steinberg's affidavit).  The petition made it very clear and Mr. Ben Simhon himself made it clear at the hearing: This matter stemmed from the fact that it was a publicly traded skeleton, which allowed possible entry into the stock exchange, without the need for an initial public offering.  As for the Authority: It has the authority to examine and experience its position on the question of turning a company into an "envelope".  For this reason, she held talks with the Petitioner's representatives in June-September 2024 concerning the Company's real business activity, which did not mature into a notice that the Petitioner had become a "shell company", while the Petitioner sought at those times to appease the Authority's opinion that the activity had not ceased definitively.
15. This interest in the Petitioner on the part of the purchasers on the one hand, and of the Authority on the other, continues into 2025, to the point of creating a kind of race against the time of the Former before the Authority declares the Petitioner as a "shell company".
16. The purchasers, for their part, signed on January 10, 2025, a memorandum of principles regarding the acquisition of control of the Petitioner by way of a tender offer, subject to due diligence to be carried out; The memorandum does not refer to the undertaking or even to the intention to introduce activity into the company if the tender offer is successful.
17. On March 30, 2025, the Petitioner published its periodic report for 2024, a report that led the Authority to conclude that this is a company with no business activity in its field of business. The Authority concluded, inter alia, from the fact that the Petitioner's employees (except for two of its officers) ceased to work in it, from a description of the Petitioner's activity (or lack thereof), and from a summary of the situation in the explanation in the financial statements as well as in the auditor's opinion, all of which noted that "the Company has no active business activity in its field of business".
18. It is clear that the road from the periodic report to the definition of the Petitioner as a "shell company" can be short. However, within minutes of that periodic report, the Petitioner added and published an immediate report: Notice of an engagement on March 27, 2025 with the purchasers in an agreement to purchase up to 80% of the Company's shares by way of a special tender offer, with shareholders holding more than 50% of the shares earlier and gave their consent to respond to the tender offer, in a manner that ensures its success.  The consideration is based on a value of approximately ILS 10.5 million per company, well above the volume of cash in its coffers, which stood at approximately ILS 6 million.  From the buyers: This is a premium paid for the TASE skeleton, whose shares are traded on the main list on TASE, and not on the preservation list.  Even in that immediate report (to which the agreement itself, Appendix 2 to the petition was not attached) there is no mention of a commitment or even an intention to merge operations into the company.
19. The periodic report led the ISA to act, in accordance with its authority under Regulations 36(e) and 36(f)(1) of the Securities Law, to examine the need to define the Applicant as a "shell company"; whereas the same notice regarding the tender offer did not dissuade it from the examination. On April 3, 2025, the ISA requested in writing the company's position on the question of whether it does not meet the definition of a "shell company", when it appears that the company does not have business activity in its field of business (Appendix 6 to the petition).  The company replied on April 9, 2025: The company has real business activity, even if limited in scope, that is expected or at least likely to generate revenue for it in the future.  This is in part, taking into account the "binding engagement" with the purchasers in the tender offer, and in particular when it is possible that the company's technological source code may be integrated into a new activity that the purchasers will introduce into the company.  The Petitioner referred to Question 115.10 of the Authority's staff, accordingto which it is possible that a corporation may not be defined as a shell company if "it entered into a binding agreement for the acquisition/introduction/establishment of activity and is in the advanced process of obtaining the relevant approvals and/or licenses, it can sometimes be viewed as a realistic business activity...".  Here, then, is the discretion of the authority.  Particularly here, when, according to the Petitioner's position in her letter, a final version of the tender offer specification that is supposed to be published within a short time is expected to include a statement according to which "the bidders will act to merge into the company shortly after the tender offer significant activity".
20. The specifications of a binding tender offer were published on April 10, 2025, the day after the company's response. It was also not attached to the petition, only to the reply, perhaps because the statement that was indeed included in it (similar to what was stated in the Petitioner's letter to the Authority), that the bidders would act to merge significant activity into the company, was preceded by a clarification (which is not mentioned in the Petitioner's letter to the Authority) that "as of this specified date, the bidders have no concrete commitments and/or intentions in relation to the company or concrete plans in relation to the company".  The tender offer was completed on May 8, 2025, with a predetermined success, and in exchange for their investment, which the purchasers estimate at ILS 6.4 million, Gazundheit - although it held only 10% of Mobility's activity - received about 29% of the Petitioner's shares (fully diluted), Ben Simhon - about 26%, and the firm of their attorney, who is also represented in the petition, received about 2.5% of the shares.
21. On May 9, 2025, the day after the completion of the tender offer, the company's external directors resigned, in coordinated letters between them (Appendix 3 to the petition), and at the "worst timing for us", according to the petitioners' counsel (p. 5, para.  14 of the petition), since the significance of their resignation is that there is no way to approve a merger, prior to the appointment of new directors, at a general meeting that will not come until 35 days have passed.
22. Four days later, on May 13, 2025, the Authority informed the Petitioner, first in an oral conversation and then in writing, that according to the Authority's staff, the company constitutes a "shell company" (Appendix 8 to the Petition). As early as May 2024, the company ceased providing services in its hands and no revenues stemmed from its operations, Toor.  The Authority's staff postponed making a decision regarding the transformation of the company into a shell company, in order to enable the company to complete business moves that will change its situation.  However, since May 2024, the company has not been able to bring itself to a situation in which it has realistic business activity, as learned from its own reports.  Contrary to its letter of April 9, 2025, the company was not even able to formulate any agreement related to its source code, as a basis for revenue.  There are no indications, as described in Responsa 115.4 of the Authority's staff, regarding activity expected to bring to the Company's revenues in the course of its ordinary business.  In light of the above, the Petitioner was required to publish an immediate report by May 21, 2025 regarding the position of the Authority's staff regarding the transformation of the company into a shell company.  This decision of the Authority, dated May 13, 2025, is the focus of the petition.
23. The Petitioner found it difficult to accept the Authority's decision. On May 19, 2025, the Petitioner contacted the Written Authority (Appendix 9 to the Petition) and sought to be persuaded that the company is not considered a shell company.  The main points are similar to those in the Petitioner's previous letter of April 9, 2025.  It also insisted that the company has realistic business activity even in light of the "new activity merged into it", and thus aimed at a move intended to complete the merger process by way of exchanging shares with the purchasers, which would end with the Petitioner holding all of Mobility's shares and allocating 75% of its shares to the buyers.  In the company's view, this move was part of a "combined transaction", and the Authority has the power to wait for its completion.  The Petitioner requested that the Authority wait another three months before declaring it a shell company, lest it complete the merger transaction in the meantime.  In this regard, she sought to build on the judgment of the Insolvency Court in the case of Insolvency (Insolvency (Insolvency (M.H.-Tel Aviv) 36-02-24 Envision Medical in a Tax Appeal v.  Commissioner of Insolvency and Economic Rehabilitation Proceedings (September 25, 2024)).  Alongside this letter, the Petitioner added telephone conversations with the Authority, and expressed its willingness to promote the merger documents; To no avail.
24. On May 21, 2025, the Petitioner published, as instructed by the Authority, an immediate report regarding the position of the Authority's staff, according to which the Petitioner is a "shell company", which led the TASE, as per the provision of Section 8(g) of the Rules, to transfer the Petitioner's shares to the Conservation List. After the publication came the petition.

The Petition and its Response

25. In the petition, which is addressed to the ISA and the TASE, the Petitioner calls for the ISA to refrain from classifying it as a "shell company" and to retract its instruction to the Petitioner to disclose the classification (even though disclosure has already been given); and it also petitions that TASE refrain from transferring its shares to the Reserve List (even though this is a move that is ostensibly necessitated by the very declaration that the company is a "shell company", and indeed took place shortly after the petition was filed). On the aforesaid side came a request for interim injunctions, the essence of which is in fact the main remedy - the postponement of the date of the declaration of the Petitioner as a "shell company" by several months, lest during which the merger will be completed and the Petitioner will no longer have an alternative (lack of) activity, which leads to its definition as a shell company.  The administrative-economic petition was submitted to the Economic Department of this Court, pursuant to the provision of Section 42C(a) of the Courts Law [Consolidated Version], 5744-1984.
26. The petition was written: The buyers chose to pay more than ILS 6 million for the company and invest hundreds of thousands of shekels afterwards, in order to take control of an active and traded company (even though they admitted in the petition that it was in fact already traded on the tradable bucket list, which also has no continuous trading), whereas if they wanted a "shell company" traded on the preservation list, they could have purchased one for only hundreds of thousands of shekels. The Petitioner argues that even without connection to the emerging merger transaction with the purchasers, it does not constitute a "shell company" at all, and that the preservation of the source code, its focus on examining business opportunities, and the employment of three or four programmers during 2024 are considered sufficient business activity.  The Petitioner is of the opinion that the position of the Authority's staff, which was published in Responsa 115.14 regarding indications of the existence of business activity, applies in her case.
27. All the more so, according to the Petitioner, it should be viewed as having a realistic business activity in view of the "new activity merged into it". However, it has not yet been poured.  However, the Memorandum of Principles from January 2025, the "binding agreement" (not attached) from March 2025, and the future merger should be viewed as a single transaction, which the Petitioner is underway, and which is supposed to introduce activity to the Petitioner, in the form of the sale of Mobility's products in Israel and around the world, while leveraging the company's technology and integrating it into Mobility's activity.  Everything, according to the Petitioner, will be completed within two or three months.  Hence, the Petitioner complies with the position of the staff in the Authority's Question 115.10, which deals with a case where "the corporation has entered into a binding agreement for the acquisition/acquisition/acquisition/establishment of activity and is in the advanced process of obtaining the relevant approvals and/or licenses".  Therefore, all the Authority was asked to do was to wait for three months for the completion of the merger, one of the conditions of which is that the company will not be defined as a "shell company".  This, as confirmed by the court in the Envision case.
28. On the administrative aspect (and we are in an administrative proceeding and not in an insolvency proceeding, as was the case in the Envision case), the Petitioner finds a variety of flaws in the Authority's decision, even though they are interrelated. First, the Authority's decision is arbitrary and disproportionate, in view of its refusal to grant the Petitioner a short extension to settle the issue.  The ISA refrained from considering the relevant considerations, including the damage to the public investing in the company, and the damage to the buyers who have invested approximately ILS 7 million in the merger transaction to date.  Second, this is a decision that is extremely unreasonable: the Authority's discretion did not include all the considerations and information that were brought before the Authority, and should have led to a different decision.  Third, the ISA's decision is discriminatory: when it comes to other grounds for transferring shares to the preservation list, such as a reduction in the scope of public holdings, the company is given a six-month extension to correct the situation, and when the company is declared a "shell company", the transfer to the preservation list is immediate.  It should be noted that in the petition (in the wording prior to the attempt to amend it) there is no argument regarding the authority of the Securities Authority to classify the Applicant as a "shell company", except for a general statement according to which "the Petitioner maintains a claim regarding the Authority's very authority to classify it as aforesaid" - an argument that certainly cannot be 'preserved' but should be posted on a website, if indeed such exists.
29. Alongside the petition, as stated, came a request for an interim injunction, which essentially called for the petition to be accepted over the site. In the course of the Petitioner's response to the Authority's response to that request (which I allowed her to submit), she tried to broaden the front, to add documents and arguments that she did not present in the petition, including attacking in practice the Authority's very authority to enact rules and to act by virtue of them in all matters relating to its declaration of a company as a "shell company", and the obligation to transfer the shares of this company - even if it itself did not announce that it was such - to the preservation list.  On the basis of the Authority's position.  I rejected this attempt within the framework of the hearing of the application for interim orders on May 29, 2025, after which I ordered that the Authority's responses be received and that a hearing on the petition be held, within a tight time frame.  However, the Petitioner decided to request on June 9, 2025, to amend its petition, to add documents and arguments, and to argue on the matter of jurisdiction.  Her request was denied, all as stated in my decision of July 6, 2025.  The respondents were therefore asked to respond to the petition.
30. TASE announced: After the company announced the position of the Authority's staff that it was a "shell company", the TASE was obligated, by virtue of Section 8(g) of the Conservation Rules, to order the transfer of the company's shares to the preservation list. Beyond that, she did not ask to express an opinion or be present at the proceedings, stressing that she would respect any decision.
31. The ISA replied, if we summarize its answer: its operation is in accordance with the rules of the stock exchange, which were enacted by law for the purpose of "proper and fair management of the stock exchange" (section 46 of the Securities Law), and some of which deal with trading in securities and the suspension of trading.  The TASE rules are intended to protect the investing public and the integrity and efficiency of trading on TASE, and to ensure clear rules of the game for companies and investors in the capital market.  While the petition does not attack the TASE rules (and this is also how my decision of July 6, 2025 explains), the starting point in our case is that the TASE rules are valid and binding on the Petitioner, like any other company.  Among these are the rules designed to deal with the phenomenon of "stock exchange skeletons," and the serious concerns that accompany the continuation of trading on the main list of such companies.
32. In our case, the Authority, the Petitioner is certainly a "shell company" as defined in Section 1(d) of the TASE Guidelines for Part IV of the Articles of Association - "a company that does not have, directly or indirectly, real business activity that yields or is expected to generate income in the ordinary course of business that is not only financing income". The examination is made in relation to the situation that existed at the time of the decision, and the situation is that there was no business activity, also in accordance with the aforesaid interpretation as presented in the series of positions of the Authority's staff from which the Petitioner sought to be built.  The merger moves described do not change the aforesaid, and at any stage did not constitute even an undertaking by the purchasers.  The significance of the aforesaid is that at the latest on the date of publication of the periodic report, on March 30, 2025, the Petitioner was a "shell company", and it was obligated to update accordingly.  Since it did not do so, the Authority acted accordingly, as stated in its notice to the Company of May 13, 2025, ordering the publication of the immediate report regarding the position of the Authority's staff according to which the Petitioner is a shell company.  The Authority adhered to this position even after holding talks with the Petitioner, until the publication of the report on May 21, 2025.
33. According to the ISA, the Petitioner's arguments regarding the difficulty inherent in exiting the Reserve List are not grounds for intervening in the Authority's decision, and constitute an indirect attack on the TASE rules. It is also not clear to the Authority, to the extent that this is indeed an activity worth ILS 170 million that will indeed be merged into the company, what difficulty will be for the Petitioner to return from the preservation list to trading on the main list.  In any event, there was no flaw in its decision that justifies the court's intervention in this administrative proceeding.  In particular, as for the postponement of the time in advance for inclusion in the preservation list, there is also no place for reasons of the need to apply a uniform norm to the corporations on the stock exchange and the need to conduct proper and fair trading.  According to the Authority's approach, we should not learn for our purposes from decisions in the field of insolvency law.
34. A hearing on the petition took place on July 20, 2025. Counsel for the parties was heard and exhaustive inquiries were made with them, and at the end of these the time came for a decision.

Discussion

35. The petition is to be dismissed. The Petitioner does not point to any reason for intervening in the Authority's administrative decision.  The opposite is true: the Petitioner's conduct shows how correct it was for the ISA to make the decision as it did, which protects the shareholders of the company, and the investors in TASE as a whole, while increasing the quality of TASE as a trading arena.  I will explain here without addressing the main issues and arguments that require detailed attention, and others do not change the required result.
36. The Proper Rules of the Stock Exchange for Dealing with Shell Companies: What the Petitioner Can't Ask for Court Intervention
37. Let us begin with what this court does not have to decide: the conservation rules established by virtue of the TASE Regulations.
38. In the contexts that are detached from this petition, it is possible to deal with the important and interesting question, as to how the TASE rules and guidelines should be designed in all matters relating to the handling of stock exchange skeletons, both with regard to the transfer of the shares to the reserve list, and with regard to their return to trading; and perhaps even to make it easier for those who poured content into a company that was a publicly traded skeleton, to return to trading on the main list. This is based on the recognition that there may be advantages to the possibility of merging with publicly traded skeletons, especially in periods when an IPO alternative is not feasible.
39. However, in the face of the advantages, the ISA warns of concerns related to companies that have become publicly traded skeletons, especially when their shares are still on the main list. This is in the context of the effectiveness of the disclosure mechanisms and corporate governance in companies that are stock exchange skeletons, possible harm to the investing public, and damage to the stock exchange as a trading platform.  The ISA describes that trading in these companies is very poor, speculative, based on unreliable information, the value of the shares does not reflect the value of the company, and the trading is prone to fraud, it explains.  Its experience shows that even after the activity is introduced into the TASE skeleton "through the back door", without the company being required to stand the test of the market and convince new investors to invest in it, as was done in a new IPO, the activity is often (and more frequently than that of companies that have made an initial public offering) the activity is unsuccessful and the company enters into difficulties again.  Circumventing the format of raising funds and listing for trading by means of a prospectus and compliance with the rules of listing for trading of a new company also harms the quality of the stock exchange, which is intended to serve as a high-quality arena for business activity, and the activity of the stock exchange skeletons, which constitute companies that are emptied of actual business activity, clouds this goal.
40. As we shall see, the case before us illustrates the basis for some of these concerns. However, the main point of our matter here is that dealing with the aforementioned concerns, alongside the attempt to ensure the interests of all concerned, is done within the framework of the TASE Regulations, its rules and guidelines, and in particular the conservation rules, by the TASE and by the supervision and involvement of the Authority.  Even if it is possible elsewhere to examine the effectiveness of the rules and the need for changes, the starting point here is simple: these are the rules.  As it should also be clear to the Petitioner, it is not for this Court to deal with the attack on the TASE Articles of Association and the rules and guidelines established by virtue thereof (see: Class Action (Economic-Tel Aviv) 56429-05-13 Peter v.  Tel Aviv Stock Exchange in a Tax Appeal at paragraphs 58-64 (April 27, 2015); and see: Section 42C(a)(3) of the Courts Law).
41. Apart from the recent attempt (which was long postponed) to directly attack the authority of the Authority to declare a company as an envelope where the company itself did not do so, and thus to lead its shares to the preservation list, the petition still embodies in its essence an attempt to obtain the rules themselves. This is even if the Petitioner sought to give this experience a different appearance, of attacking the discretion of the authority.  In particular, the Petitioner's main grievance: regarding the rule (section 8(g) of the Rules) according to which immediately upon the company's notice, or the Authority's notice, that a company is a "shell company", will be transferred to the preservation list; This is in contrast to other preservation torts (such as a decrease in the value of public holdings) in which the company is given a period of several months to repair it, before being transferred to the preservation list.
42. This attempt by the Petitioner to compel the Authority to act in a manner that is not in accordance with the rules will not succeed. This, of course, is because these are the rules, and these should not be interfered with within the framework of this petition as aforesaid.  Additional reasons will therefore be noted only in the context of superiority:

First, the logic of the rules with them: when a company has become an envelope, since it does not "yield or is expected to generate revenue", there is no point in leaving it traded in continuous trading, according to the TASE Regulations, only because it is an attractive target for acquisition, and it is possible that given enough time, new content will be acquired and filled.