Legal Updates

Israeli law applies to companies that are traded in Israel and also in an additional stock exchange

May 27, 2021

A shareholder of a dual listed public company, which shares are traded on both the Nasdaq and the Israeli Stock Exchange, moved to approve a class-action against the company, contending that the company executives made misleading representations regarding the company's position in order to increase company stock value.
The Court approved the class-action and held that the provisions of Israeli law apply to the company and its directors and thus exemption under American law do not apply. The Israeli legislature seeks to make it easier for companies to list their shares for trading on a non-Israeli stock exchange, but this does not negate the applicability of Israeli law regarding breach of the law by the Israeli corporation reporting also outside of Israel. Indeed, the law provides for specific exemptions, but the absence of specific provisions regarding liability for such publications does not stipulate that the legislature intended to apply only the liability provision under foreign law instead of those in Israeli law. A class-action is approved if it raises a material question common to all class members, there is a reasonable possibility that it will be decided in their favor, the class-action is the effective and fair way to decide the circumstances, and there is a reason to believe that it will be conducted fairly and in good faith. Here, there is concern that as at the time of publication of the positive forecast by the company it had conflicting data indicating that the forecast was unrealistic, and the directors have not taken all appropriate measures to ensure that there is no misleading detail in the forecast. Thus, the motion for approval of the claim as a class-action was accepted.