(b) The court may, at the request of a shareholder who does not hold shares at the rate stated in sub-regulation (a), instruct the company to allow the shareholder to review all or part of the documents and records specified in sub-regulation (a) under the conditions it will determine.
- From the aforementioned Regulation 10(a) (which the plaintiffs do not fall within the scope of at this time) it appears that the holder of 5% of the total voting rights in the company, minus those of the controlling shareholders, is automatically granted the right to review the voting papers and voting records through the electronic voting system (hereinafter referred to collectively for convenience: the voting data). The exercise of this right is not subject to the company's discretion and in any case does not require the exercise of judicial discretion. However, the plaintiffs do not have a vested right to review the voting data, at this time, and will not be considered as such, unless and when they win their claim in the parallel proceeding that Mann's shares (approximately 20% of the share capital and voting rights) will also be registered in their name. At this time, the plaintiffs are listed as owning only 0.74% of the company's share capital, and even after deducting the holdings of the controlling shareholders (about 20% of the company's share capital), these holdings are still far from the 5% threshold in Regulation 10(a) of the Regulations. Hence, the ability of the plaintiffs to review the voting data is currently subject to the approval of the company, and alternatively, if the approval was not granted (and was not given), is subject to the approval of the court by virtue of Regulation 10(b) of the Regulations.
- The subordinate legislator did not specify the criteria that would guide the court when it came to examining whether to allow a shareholder who is not one of the owners of the acquired right to review the voting data. When we come to determine them, we must therefore try to insist to the extent possible on the purpose of the enactment of the regulation, and so did the parties in their arguments. Naturally, the plaintiffs hold a relatively expansive interpretation as to the purpose of the Regulation, while the company on the other hand - the interpretation of a distress. The plaintiffs argue that the general context for the interpretation of Regulation 10 is intrinsically related to the purposes of the Written Voting Regulations as a rule, which are supervision of the company and its controlling shareholder, increasing the involvement of shareholders in the company's decision-making, and encouraging communication between the shareholders themselves. This is as can be learned from the language of all the regulations and from sections 87-89 of the Companies Law, by virtue of which the written voting regulations were enacted. The company's position on the other hand: The entire purpose of Regulation 10 is to examine the eligibility of the ballot paper, and to ensure that there was no defect in the voting process. In her opinion, it is sufficient to supervise the voting eligibility by the company's attorney, or alternatively, by a 'neutral' party.
- We will first address the purpose that there is no dispute between the parties, that it is the basis of the regulation, and that is the supervision of the proper voting. The plaintiffs' view is that effective supervision requires granting a shareholder the opportunity to be entrusted with that supervision; the company, on the other hand, proposes that it is sufficient to ensure that "the voting was correct," i.e., in fact, that the supervision will be purely technical. The plaintiffs' approach is preferable.
- The language of the Regulation, even though it does not specify any detail of the standards that the court will apply, it already directs us to reject the concept of 'technical' supervision, i.e., one that is carried out in the world within the company, or at most by a neutral party that knows nothing about the company and is not involved in its affairs. Had the legislature sought to suffice with such supervision, detached from the circumstances and even from the scope of the holdings of the shareholder who wishes to be examined, there would have been no need for Regulation 10(a) of the Regulations (the right to inspect 5% of the unaffected shares), and all the more so not in Regulation 10(b) of the Regulations (discretion to allow the holder of holdings lower than the aforesaid ones to examine the data himself). It would suffice to say that at the request of a shareholder, an authorized representative of the company or someone on its behalf would examine the data. But this is not how the legislature acted, granting the right to inspect (or the authority to petition for a right to inspect) to the holders of the company's shares, those who are financially motivated to conduct a proper examination of the data.
- The existence of Regulation 10(b) and its language therefore indicate that the legislature is correct in principle to allow in principle any shareholder in a company permission to review the voting data (by the way, in a manner that expands the right of a shareholder to receive information beyond what is stated in sections 184-185 of the Companies Law), even if the company refuses to allow it, all subject to the approval of the court. However, the language of the section does not help beyond what has been stated on the question of the criteria for granting this permission, since the language of the Regulation ("the court may") suffers from any interpretation, in the absence of any instruction to the court as to when it will exercise its discretion and allow the shareholder to review the voting data despite the fact that it has not reached the threshold in Regulation 10(a). The usual interpretive approach, therefore, - and the same with respect to subsidiary legislation - will be to the subjective purpose (the examination of the goal that the legislature sought to advance and which was actually before its eyes, as learned from legislative history) and its objective purpose (the same goals, values and principles that legislation in a modern and democratic society is intended to achieve) (see: High Court of Justice 1765/22 Tomer Warsaw Law Office v. Minister of the Interior in paragraph 23 [Nevo] (July 3, 2022)). Although the tools for an in-depth interpretive discussion of the specific regulation are quite scarce, these two approaches still lead to the conclusion that effective supervision is at the foundation of the regulation.
- As far as the subjective purpose is concerned, the means available for the interpretation of a regulation provision are limited, as can often occur with regard to the interpretation of secondary legislation ( the Warsaw case, supra at paragraph 28). It is only possible to learn about the purposes of the Voting Papers Regulations (all of them as a whole) mainly from their wording and the authorizing provision of the Law, in sections 87-89 of the Companies Law.
- The Written Voting Regulations regulate, among other things, everything that is required regarding the ballot letter, as well as voting in the electronic voting system, through voting, and the wording of "position statements" that management and even shareholders can send (even though in practice the shareholders do not bring it to the table) to the other shareholders. Ballots, as opposed to voting at the meeting itself, can be "withdrawn": up to 24 hours before the meeting, a shareholder, if he chooses on his behalf, to withdraw the ballot and confirm the ownership of his shares. The votes of those present at the meeting, and of the voters in the ballots (which were not continued) and in the electronic voting system will be counted by a supervisor appointed by the board of directors, and the voting data will be stored in the company (Regulation 11 of the Regulations).
- The Written Voting Regulations came into effect in 2006 (and were amended in 2014), and they regulate (as their name suggests) the subject of written votes and position statements. The Minister of Justice is the Minister of Justice, inter alia by virtue of his authority under section 89 of the Companies Law. The written voting arrangement allows a shareholder in a public company to vote at the general meeting, on a closed list of matters, including transactions of interested parties, by submitting a vote to the convener of the meeting, or by sending it by registered mail. A ballot that has reached the company by the deadline will be considered as attendance at the meeting for the purpose of holding the legal quorum, and will be counted in the vote count (see: Section 87 of the Companies Law; Dov Solomon, "Rational Apathy of Shareholders: How to Wake the Investor Public from Its Sleep?" Iyunei Mishpat 39 317 (2016) (hereinafter: Solomon)). In addition to the vote, in Amendment 53 to the Securities Law, 5728-1968, the electronic voting channel was also added to the system established by virtue of the provision of Chapter G2 of the Law.
- The aforementioned brief overview helps to understand the nature of the written voting regulations in general, and of course reflects on the understanding of the provision of Regulation 10(b) of the Regulations in particular. The legislature, with the involvement of the Israel Securities Authority, acted gradually in order to create and develop the obligation on the public company to allow its shareholders to vote without physical presence. The regulations are intended to enable the participation of shareholders in the decision-making process at the general meeting, while minimizing the costs involved (see: Zohar Goshen and Assaf Eckstein, Corporate Law 95-96 (2023)). Thus, 'corporate democracy' is strengthened, which grants legitimacy to the company's managers to act on the property of the shareholders, enables an effective mechanism to request that the company's management act in the best interest of the company and its shareholders, improves the quality of the protection of shareholders from among the public, and contributes to the development and improvement of the capital market (see: Solomon, at pp. 319-320)).
- The subjective and objective purpose, as far as the Voting Statements Regulations are concerned, are similar: increasing the involvement of shareholders in the company's decision-making process, supervising management and controlling shareholders, and encouraging communication between shareholders. Regulation 10, which, according to its language, deals with the subject of supervision, is therefore a central pillar in the aforesaid: effective supervision of the voting process, and its delivery to the shareholders concerned. If a ballot is one of the most effective ways for shareholders to make use of their voting power and maintain a democratic corporate regime (Yosef Gross, Companies Law 466-467 (Expanded Fifth Edition, 2016)), then it is effective supervision that enables this purpose to be
- It is also clear that the same supervision is capable of achieving the broader purpose of the provisions of the Companies Law (sections 87-89 of the Law, and the voting regulations in general), of the involvement of the shareholders in the company: in its absence, the motivation of the shareholders in the company to try and influence what is done in it is impaired, by way of participation in the vote, which according to them may be perceived as being decided in any case by the will of the controlling shareholders of the company.
- Effective supervision (to the extent possible) is also required, with regard to the examination of the voting that requires the approval of the untouched majority of the shareholders, taking into account the fact that the company itself does not in fact have other control tools on the question of the authenticity of the statement of the shareholders who indicate a lack of personal interest in their voting, as stated in section 276 of the Companies Law. Suppose for the purpose of the discussion that a proposal on the agenda that required the approval of an untainted majority due to its connection to the controlling shareholder, won a majority, as aforesaid, as indicated by the vote count of the shareholders who declared themselves untainted; Let us also assume that a shareholder wishes to question the merits of the vote and the degree of 'neutrality' of the shareholders who joined forces with the controlling shareholder in their vote. A technical counting of the votes (by any party) will, of course, indicate the existence of an untouched majority, according to the voters' statement. According to the company, public opinion is supposed to be suppressed, without the need for any investigation or demand. However, this approach has a variety of difficulties, one of which is that the company is not obligated to check whether when a voting shareholder announces in his ballot that he lacks a "personal interest", this notice is correct. The obligation in section 276 of the Companies Law regarding the notice of personal interest is directed at the shareholder, and not at the company (see: Criminal Case (Criminal Case (Division-Tel Aviv) 40162/05 State of Israel v. Algur at paragraph 179 [Nevo] (January 6, 2009)). In fact, it does not even have the practical power to do so (as opposed to, for example, in English law; see: Amir Licht, "Solidarity Rally - The Obligation of Disclosure of a Shareholder at a General Meeting", point at the end of a sentence (February 29, 2016)); and it is reasonable to assume that she will not have any special motivation (taking into account the support of the controlling shareholder in the decision). Transferring the supervisory ability to a private holder of the company's shares, as allowed by the legislature within the framework of Regulation 10 of the Regulations, therefore adds effective supervision and control. Admittedly, the fact that according to Israeli law the voting shareholder must technically identify does not mean that it will necessarily be possible to easily extract who has the real interest behind the voter (see: Opening Motion 36222-11-13 BlueMountain Capital Management LLC Taro Pharmaceutical Industries in a Tax Appeal at paragraph 39 [Nevo] (February 23, 2016; hereinafter: the Taro case)). To the extent that the owner of the interest, perhaps who wants to visit the controlling shareholder, is camouflaged behind a corporation or a 'straw man' (and cf. the Algor case), "sophisticated and aggressive" mechanisms will be required to discover this. However, the legislature saw within the framework of Regulation 10 of the Written Voting Regulations the right to equip shareholders who wish to protect their property with the right to do so, and it is possible that even if their holdings fall below the 5% threshold, the court will consider their right to review the voting data.
- From what has been said so far, it appears that the main purpose of Regulation 10 of the Regulations is to provide the shareholders with the possibility of effective supervision (taking into account the scope of their holdings), and not only the technical calculation of voting data and reporting them to the shareholders.
- A separate question to which we will turn is whether "the encouragement of communication between the shareholders themselves" (as the plaintiffs claim) is also a purpose of the said regulation, an issue on which the parties disagree. Here again the gap is between the specific regulation and the written voting regulations in general. Regulation 10, according to its wording, certainly does not mention the promotion of communication between shareholders, in contrast, for example, to Regulations 6 and 8 of the Written Voting Regulations, which deal with the delivery of position notices to the other shareholders prior to the vote. However, this does not at all determine that the desire of a shareholder to allow him an opening for such communication, where he lacks information regarding the identity of the shareholders from the public involved in the company's decision-making, exceeds the purpose of the regulation, or justifies denying him the possibility of providing voting data. If the legislature sought to promote the involvement of shareholders in the decision-making and supervision process, and saw the benefit of communication between them, then there is nothing wrong with the desire of shareholders to find ways of communication with other shareholders, while exercising supervision of voting.
- Hence, the company's comment on the importance of protecting the privacy of shareholders, which the company finds is also within the purposes of Regulation 10 of the Regulations. According to the company's approach (paragraph 18 of its summaries), the encouragement of voting is possible in light of the convenience of voting and specifically through "maintaining the voter's anonymity," as it puts it. In support of this argument, they refer to the decision in the Taro case, which was given by the Honorable Justice Grosskopf while serving in the Central District Court. It is an eruv of the opposite sex. That case concerned a company that was incorporated in Israel but whose shares are traded in the United States, and in accordance with the law, was exempted from the application of the Written Voting Regulations. Among other things, the significance of trading the company's shares in the United States, and not in Israel, was discussed. The court noted the gap between the "Israeli voting model" (which began in the case before me), which obligates the voting shareholder to identify himself before the company, by providing the details registered with the TASE member through whom the share is held, and the "voting model in the United States" (which applies in the Taro case): this model allows voting not directly with the company but through voting management companies, without the company then having full information regarding the identity of the actual shareholders. How each of them voted, and in any case it is unable to verify whether the person who identified himself as having no personal interest in voting is indeed one. The same "anonymity" that the Taro case deals with (paragraphs 16 and 42 of the decision), and which the applicants, the minority shareholders there, requested that it not stand in their way, is concerned with the American voting model (as reviewed in paragraphs 18-19 of the decision). However, this model has no relevance in the case before us. A company incorporated in Israel and whose shares are traded in Israel is subject to all the provisions of the Companies Law and accordingly the written voting regulations. A vote in it will therefore be done in accordance with the "Israeli voting model" (in the language of the Taro case), which requires identification to the company (as discussed in paragraph 17 of the decision; a duty of identification, which should be emphasized that it is technical and does not exclude the possibility of hiding one's identity behind a corporation or a straw man - paragraph 36 of the decision). Contrary to the company's claim, therefore, voters in a company whose shares are traded on the Tel Aviv Stock Exchange have no real expectation of anonymity: not from the company itself, not from the shareholders who are entitled to review the voting data by virtue of Regulation 10(a) of the Written Voting Regulations, including the controlling shareholder himself (and this was explicitly explained by the way in the voting papers sent by the company to the shareholders), and not from a shareholder who may receive such a right by virtue of Regulation 10(b) of the Regulations. Hence, written voting regulations are certainly intended to encourage the public to vote, but not to guarantee them anonymity by the way.
- It therefore follows: The purpose of the written voting regulations is to increase the involvement of shareholders in the company's decision-making process, to supervise management and controlling shareholders, and to encourage communication between shareholders. Regulation 10 of the Regulations focuses on the subject of voting supervision, with the intention of effective supervision of the voting and its integrity, not only technical verification of the share of ballots that can never be left to the company alone, or perhaps practically - to its controlling shareholders. The Regulation does not deal with the issue of communication between shareholders, but the desire of a shareholder to open a direct channel of communication for himself with other shareholders, lest those who are not in the company's shareholders' register, do not contradict the purposes of the Regulation.
- Criteria for Exercising Discretion in Examining a Request by Shareholders Who Do Not Have a Vested Right to Review Voting Data
- Having discussed the relevant provision of the law and its purpose, it is possible to turn to setting guidelines for the form of the criteria that will be used by the court when it comes to exercising its discretion by virtue of Regulation 10(b) of the Written Voting Regulations, if to allow review of the voting data also for the shareholder whose holdings fall below the threshold set in Regulation 10(a) of the Regulations. These will be:
(1) The scope of the applicant's holdings in the company's shares.