A public company which shares were delisted as early as 2010 sought to cease reporting as a public company after this request was approved at a shareholders meeting by a majority of 70% of 106 public shareholders.
The Court held that the company may cease reporting as a public company. Generally, a reporting corporation which number of public shareholders does not exceed 200 may terminate its reporting obligations. Nevertheless, additional considerations that need to be taken into account are the number public shareholders who voted in favor of terminating reporting obligations; The amount of time that passed since the company was delisted; The company’s scope of activity; Whether a tender offer has been made to the public shareholders, etc. Such an alternative enables a reporting corporation to terminate its reporting obligations when the costs of meeting these obligations are disproportionate to the benefit derived from their existence for the public shareholders. Here, the passage of time as well as he fact that most of public shareholders have approved the termination of the reporting obligations justifies the cease of reporting as a public company.
Published in Afik News 333 April 21, 2021