"Israel has taken numerous additional steps to strengthen an already robust framework to prevent the abuse of minority shareholder rights, including for related party transactions in particular," states the OECD in its Related Party Transactions and Minority Shareholder Rights report.
This year, the OECD corporate governance survey covered five countries: Italy, France, India, Belgium, and Israel. The survey examined regulations on parties at interest transactions and the enforcement of the regulations. The Ministry of Justice and Israel Securities Authority represent Israel.
The report is based on a self assessment on regulation and supervisory practice on parties at interest transactions that the Ministry of Justice and Securities Authority submitted to the OECD. The OECD report examined the measures Israel has taken to strengthen the minority shareholder rights in companies over the past two years.
"The establishment of the Tel Aviv District Court’s Specialized Department to consider class action and derivative suits as well as criminal cases filed by the State is seen as having a significant impact in speeding up the resolution of court cases and enhancing the expertise brought to bear by these courts. Its first decision was seen as sending a strong signal to the market that minority shareholder rights will be supported," the OECD report states.
"An important new development is a Securities Law amendment that allows ISA to impose administrative sanctions (such as fines, suspension of licenses, requirement to repair the violation and not repeat it, etc.) or negotiate a settlement. Prior to this amendment, they only were allowed to pursue criminal cases, which are more time-consuming and complex, involving a higher burden of proof," the report continues. It also favorably mentioned the Security Authority's ability to take enforcement measures in less severe cases (cases of negligence), where the burden of proof is not as strict.
The OECD says that Amendment 16 to the Companies Law strengthens the power of minority shareholders when approving parties at interest deals and the appointment of external directors. It also cites an amendment that allows the Securities Authority to help finance derivative suits filed by plaintiffs (lawsuits filed by shareholders in the name of the company).
The OECD concludes, "Israel has broadly implemented the OECD Principles relevant to the prevention of abuse of related party transactions, with one of the most elaborated systems of disclosure and review among OECD countries reviewed."
Published by Globes [online], Israel business news - www.globes-online.com - on December 22, 2011
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