The Israeli Securities Authority declared a public company which business activity had ceased as a "shell company," which led to its inclusion on the conservation list and that a purchaser who sought to include private activity in the remaining shell company would not be able to do so. The purchaser opposed the company's inclusion on the conservation list.
The Court held that the Israeli Securities Authority was entitled to transfer the company to the conservation list. The TASE Regulations state that a company that has no real business activity or that 80% or more of which total assets are funds that do not confer control under Israeli GAAP, will be deemed a shell company. When a company is deemed as such and the conditions required for the resumption of trading have not been met, its shares are transferred to a conservation list which means limited trading. If a purchaser wishes to inject activity into such a company, he has the right to do so, because the company has not ceased to exist, but cannot take control of the company while ignoring the TASE regulations, which require, inter alia, publishing a prospectus to the public, as the primary goal of the regulations is to protect public investors. Here, the purchaser sought to cancel the decision of the Securities Authority so that he could bypass the stock exchange rules and introduce the activity into the shell company without a prospectus after the company entered the conservation list. However, the company has no activity and therefore the Authority was right to include it in a conservation list. Therefore, the purchaser will be required to take actions to remove the company from the conservation list and only thereafter merge the activity into it under the TASE regulations.