March 27, 2017 / by Itay Gura
Forces That Drive Innovative Countries – The Israeli Example
Forces That Drive Innovative Countries – The Israeli Example
Innovation occurs at different levels between one country and another. Innovation does not occur by accident. While some nations depend on individuals to drive the creative process, others provide an environment and infrastructure that foster and support technological development. When a country focuses its attention on providing the best opportunities to innovate, that country can rise above the pack. Global Innovative PowersThe United States and Japan have thrived for many years as countries that foster innovative development. Each nation has maintained an interest in educating its citizens in science and technology, encouraging the best and brightest to create ways to improve the world. The United States is responsible for almost 30 percent of the world's patents, and hosts 15 of the top 25 research universities in the world. Japan, meanwhile, has the world's third largest economy and has long established itself as a key global player in the auto making and electronics markets. In Europe, several countries have risen as leaders in the race to innovate. Denmark, Germany, and the United Kingdom in particular support technological growth through educational opportunities and governmental spending. The World Economic Forum ranks Germany fourth globally in company spending on research and development, and sixth for the quality of its research institutions. Meanwhile, the United Kingdom has pledged to increase its national R&D investment by two billion pounds by the year 2020. Denmark possesses particular strength in emerging and renewable energy innovation. Israel: The Perfect Innovative StormIsrael, nicknamed the “Startup Nation”, is known as a center of technological innovation, and appears on the radar of many leading international companies looking to invest in and acquire innovative technologies. Israel can be seen as an example of a country focusing on fostering innovation. The international interest in the local innovation economy is reflected in the scope of international investments and acquisitions of Israeli based tech companies and by the presence of more than 200 development centers of multinational top-tier corporations. Cyber security, Automotive technology, Fintech and the Internet of Things (IOT) are the current favored flavors. The innovation ecosystem is spreading across the entire country, branching out from Tel Aviv, Haifa and Herzliya, to Jerusalem, the Galilee and the Negev. The Israeli government endeavors to support the technology innovation ecosystem, which is also supported by numerous accelerators, incubators and early stage funds, some of which are supported by leading international companies and major financial institutions. Last year saw the introduction of an important amendment to the Encouragement of Research and Development Law, easing the rules governing technology transfer and establishing a new National Authority for Technological Innovation (NATI), replacing the Office of the Chief Scientist (OCS). New relevant tax rules are being considered and are expected to come into effect in 2017. Matters under consideration include treatment of intellectual property held by multinational companies, cross-border transfer pricing, taxation of online based businesses, and treatment of “reverse vesting” mechanisms. Source: barlaw.co.il
Technological solutions are developing every day, world-wide. In Israel, the transportation sector provides impressive examples of innovation at work. Urban growth naturally reaches a saturation point, at which people either need to move or commute farther each day, creating higher costs and greater safety concerns. Smart mobility consists of the movement to make transportation easier, safer, more environmentally friendly, and more efficient. And Israel has taken a leadership position in developing companies and technologies that help make it possible. Autonomous DrivingOne key area of innovation in which Israeli companies are developing key technologies is autonomous driving. Human errors account for most auto accidents, driving up insurance rates and creating havoc in highly populated areas. Waze pushed navigation tech to new levels through data sharing. Otonomo is working to connect cars to the Internet of Things by increasing the data that vehicles can share among owners, automakers, and commercial service operators. These technologies represent a key component to helping automate not only drivers' daily commutes, but commercial delivery fleets as well. Meanwhile, Innoviz Technologies and Mobileye are improving 3D imaging and mapping around vehicles to improve their ability to sense and respond to what is around them. The more sensitive vehicles become to their environments, the greater their capability to advance beyond human perception, making this a critical development area in smart mobility. Connecting Technologies TogetherThese technologies serve as part of a broader ecosystem of smart mobility developing in Israel, in what could be a $9 trillion industry by 2030. Companies like Softwheel and Aquarius are working to help cars work better and more efficiently to improve the world around the vehicle in which it drives and to help reduce the number of vehicles. Companies like Moovit connect users to public transportation. Combining these with the data capabilities and the technologies emerging from Israeli companies helps build a thriving system of innovation in the area. Businesses succeed by developing ideas that build on each other. Smart mobility depends on creating new applications that lift the transportation sector. And Israel's national focus on innovation and startup development serves as an ideal breeding ground for this kind of whole-sector development. To work through the legal and regulatory structure and help create growth in smart mobility, you need experienced guidance from people who understand how to do business in Israel. Contact Barnea & Co. to take the next step toward a better world. Source: barlaw.co.il
One of the common remuneration mechanisms in startups and technology companies is the granting of options to employees in addition to or, sometimes, in lieu of, the traditional remuneration component – the cash salary. The practical meaning of granting options is that employees are granted a right to purchase shares of the company at a fixed price at some time in the future. Options enable startups to compensate for their inability to offer attractive salaries and recruit a top-tier workforce (due to the lack of available funds in the initial stages of a start-up’s lifecycle) and, at the same time, the grant of options serves as an effective tool to align the interests of the employees with those of the company. Recently, we have been seeing an increasing number of cases in which successful startups that succeeded in securing investments from more than one investor in at least two investment rounds, find themselves in a complicated situation, whereby the company’s capitalization table following the above investment rounds does not enable the company to effectively incentivize its employees. How does this situation occur?When a company raises capital from strategic investors (for the most part, venture capital funds), it grants preferred stock to those investors against their investment. One of the key rights attached to preferred stock is the right to receive a certain portion of any future proceeds distributed upon the sale of the company, prior to the remaining shareholders (liquidation preference rights). Since every strategic investor seeks to ensure a pre-determined return on investment, a company with several strategic investors may find itself in a situation whereby, upon the occurrence of a sale event, the distribution waterfall of the proceeds dries up before it reaches the company’s ordinary shareholders, which, ordinarily, are comprised of the company’s founders and employees. This situation poses a major challenge to the company to retain and recruit the “best and brightest” employees, especially since in this era employees in the field of high-tech are well informed regarding equity incentive mechanisms and they are looking to join a company that offers a substantive equity incentive – and not just one on paper. This situation is also disturbing for the company’s current and potential investors, as every investor appreciates that the best way to guarantee that its investment will eventually reap profits is to ensure that the company’s employees are fully committed to the company’s success. In order to create that incentive for the company’s employees, companies facing the above predicament may amend their equity incentive plan and adopt what is known as a carve-out plan. A carve-out plan essentially “carves out” a fixed percentage of any future sale event and designates such percentage of the founders or employees of the company. The adoption of a carve-out plan requires full coordination with the company’s current investors, since they are the ones who will be relinquishing a certain portion of the proceeds to which they are entitled, to the benefit of the founders or employees. The adoption of a carve-out plan also raises significant legal considerations, such as the need to amend the company’s existing articles of association in order to create a new class of shares which is specifically designed to provide the grantees under the carve-out plan with the exact rights which are required to implement the plan, without disturbing the existing relationships between the company’s shareholders. Additionally, the adoption and implementation of a carve-out plan raises issues in the field of taxation, due to the need to seek the Israeli Tax Authority’s prior approval to the carve-out plan before it can be implemented. How can companies avoid this situation?Founders of startups need to devote considerable thought and planning prior to raising investments regarding exactly how much funds they require for the purpose of carrying out their business plan, and at what company valuation. Often, accepting a lower investment amount than the amount that the company could raise in a particular investment round, or holding off on raising capital until the company reaches a more mature stage, thus enabling the company to raise capital at a higher valuation, will minimize the dilution of the ordinary shareholders of the company. Of course, it is far easier to write about refusing available funds than actually turning such funds down in reality. However, adopting this kind of long-term thinking on the part of the founders of startups, and taking the issue of incentivizing employees as a dominant consideration from the company’s inception, may assist in avoiding having to face a problematic ownership structure which ultimately requires adopting a carve-out plan. Source: barlaw.co.il
In many ways, electronic communications dominate the world as we know it. We "talk" through email, text, and social media, to the point that the written letter is almost an anachronism. Still, some areas still thrive on paper. Real estate, for example, depends on paper deeds and documentation to confirm authenticity. Similarly, many corporations depend on paper records to demonstrate regulatory compliance. But blockchain is helping to change all of that. The technology that made Bitcoin work is expanding, in Israel and beyond, to help secure online processes and chains of custody in ways that can help shift paper-dominated fields into the 21st century. Smart ContractsWhen contracts determine payments or other actions, they operate inefficiently. Before you move funds, you have to confirm conditions have been met, organize your information, and perform accordingly. Smart contracts use blockchain technology to change this. Once information is entered, you move through the conditions required and the contract auto-updates. You can even update a smart will without creating a new will for every change. You complete everything more efficiently, using a cryptography-secured function that prevents problems the paper processes cannot. Paper BureaucraciesSimilarly, bureaucracies exist to create layers that protect information and ensure fairness and accuracy through process. Blockchain saves time and money by building this in electronically. Imagine a system that once required 12 forms, signed in triplicate to allow a decision to become implemented. Blockchain technology creates a mechanism by which this process plays out online, all through secured processes. You need not worry about tracking down every person in the chain when something has to be done quickly. Rather, you move forward quickly and efficiently without losing any of the fail-safes in place. Real EstateIn Israel, you must move through the Land Registry Department, or Tabu, to purchase and register real estate. The property world remains a bastion of paper processes in an electronic world. But the legal functions that have long necessitated paper documentation can adapt to blockchain technology. It creates the security that paper has always done, but with a process that is efficient, transparent, and public. To sell or purchase property, this option can vastly improve on the time currently required. Blockchain technology is exploding in Israel, with new startups and applications emerging constantly. To learn the ways in which you can navigate the legal landscape in the face of all this change, contact Barnea & Co. Source: barlaw.co.il
For many years now, Israel's emergence and growth on the world's economic stage has captured the attention of national and private investors all over the globe. It is only in recent years, though, that this has come to include Japan. In the past few years, more and more Japanese corporations have opened R&D and sales centers in Israel, while business delegations are continually streaming into Israel. One of those companies which recently entered Israel is Fujitsu, the largest IT company in Japan and the fifth largest in the world. Technological RelationshipsBusiness relations between the countries received a substantial boost, after Prime Minister Netanyahu's visit to Japan in 2014. The visit led to an historic R&D agreement that included a Memorandum of Cooperation and a Memorandum of Understanding, both designed to foster relationships between the two countries and create cooperative endeavors in technology. In July 2015, this lead to three distinct joint industrial R&D projects and on February 2017 both countries signed a bilateral investment treaty. One of the attractive areas for Japanese companies is Cybersecurity; Japan has long recognized Israel's position in this area, and stands to benefit from Israel's knowledge base and growth. The agreement between Israel's Radiflow and Japan's NEC focuses on integrating cybersecurity with physical security. Another agreement, between VocalZoom Systems and Fuetrek, focuses on audio technology that hones in on a speaker's voice while eliminating background noise. These agreements just scratch the surface of the potential this relationship creates. Japan has long been a world leader in technology engineering, and Israel's prowess in these areas has led to a sustained boom period in startups and technology investment. Together, the countries should be ready to build new technological opportunities in finance, technology, agricultural technology, the Internet of Things, Automotive, Cybersecurity, and much more. Where Next?The interest factor is not a one way street. Israeli companies are also showing interest in investing in the Japanese market in various sectors. Both countries enjoy innovative entrepreneurs who are driven to constantly push the boundaries of technological development and advancement. This era of cooperation between Israel and Japan will most likely help to cement relations between the countries on various levels, such as mutual tourism and support in international forums. Source: barlaw.co.il
The explosion of e-commerce in the last 15 years has made it easier than ever to manage the logistics of doing business in multiple countries. The global reach it creates, though, has spawned a litany of tax questions. You need to determine which jurisdictions have the authority to tax you and your business activity and what taxes apply. Your physical location and your end-customer locations can impact what you pay to whom, but other factors might also apply. Managing this process is critical to your continued e-commerce operations. Where to Tax IncomeThe issue of the jurisdiction to tax e-commerce is a complicated one, which many countries have yet to resolve. In 2016, the Israeli tax authority laid down guidelines on taxation for companies involved in e-commerce business in Israel. A company will owe taxes to Israel for e-commerce income if it either has a physical presence or a significant economic / digital presence in Israel. Thus, even if you do not have a physical presence within Israel, Israeli tax liability may still be triggered on account of various non-physical factors, which usually are not common in determining tax liability. Value-Added Tax for E-CommerceValue-added tax (VAT) presents its own concerns. Do you pay this tax to the location where the customer is located, or where you have your base or a physical presence? Part of this depends on what you are selling. In the EU, for example, payment of VAT on physical goods goes to the seller's location. Electronic services, on the other hand, are charged VAT where the end consumer is located. In Israel, Section 60 of the VAT Act requires foreign companies that have business or activities in Israel to register a representative in the country within 30 days of beginning to operate in Israel. This registration helps ensure that sales completed in Israel allow for identification and collection of VAT liability. Here, too, the guidelines issued by the Israeli tax authority allow for creating VAT liability solely on the basis of a significant economic presence in Israel. How to Collect Taxes on E-CommerceYour business can collect these taxes much more effectively by building multinational tax rates into its e-commerce platform. Applications that identify recipients by IP address or other indicators of the customers' locations can connect to current VAT tables to identify what to charge. Similarly, income taxes can be calculated by sorting where sales occur and where the economic impact falls. Barnea & Co. has experienced attorneys adept at helping clients manage the intricacies of multinational tax issues that arise through e-commerce. Contact us for help piecing your taxation puzzle together. Source: barlaw.co.il
Spam consists of unsolicited text messages, email messages, faxes or auto-dial calls that are sent for commercial purposes. Due to the ease and low cost in which e-mails can be sent, e-mails are the main focus of any discussion concerning spam. In Israel and around the world, preventing unsolicited e-mails has gained attention as creating serious privacy concerns – in connection with the sending of unsolicited e-mails as well as in connection with the manner in which the e-mail addresses are gathered for the purpose of sending the e-mails. In order to tackle these issues, laws against spam were enacted across the world. In Israel, 2016 brought the first amendment to the country's anti-spam legislation, which created a special regulatory regime for political propaganda and donations for non-profit organizations. Opt-In vs. Opt-OutGenerally, Israel's anti-spam legislation requires a person to opt-in, by way of an advance explicit written consent, in order to allow sending that person advertising materials. This is opposed to an opt-out mechanism, in which advertising materials can be sent to a person unless that person states affirmatively that he/she does not want to receive them. There are exceptions, of course. If you have a prior business relationship with someone, you may send advertising materials without an opt-in, under certain conditions. Similarly, under the new amendments, a non-profit organization or public benefit company can send unsolicited materials seeking donations without an opt-in from the addressee. Importance of Securing ApprovalRunning afoul of the legislation allows the person receiving the unsolicited correspondence to seek damages in the amount of about $250 for each unsolicited communication, without the need to prove any damages incurred. The legislation also provides for criminal penalties, fines as well as managerial legal obligations and liabilities. The right legal advice can go a long way toward helping you stay compliant with Israel's anti-spam legislation. The lawyers at Barnea & Co. can help you navigate the pitfalls of sending advertising communications. Contact us today so we can help you follow a path toward compliant advertising. Source: barlaw.co.il
Investors in startup companies need to learn as much about those companies as possible to make an informed decision. You do not want to go in blind before you put money into a startup a company. Still, the company in which you seek to invest needs to protect its confidential and proprietary information; otherwise, it stands to lose the benefit of introducing an innovative solution to the market. In order to put both sides at ease at the initial stages of the engagement, investors and startups generally turn to non-disclosure agreements (NDA’s). These agreements are designed to protect confidential information, while providing investors the information they need in order to make a determination whether to invest in a given startup. Defining PartiesAs with any contract, an NDA must define who the parties are. An investor may have interests in related companies and the agreement will spell out whether any information can be shared within a larger network, specific entities, or just specific individuals employed by the investor or acting as the investor’s consultants. It is important to define the party receiving the confidential information in a way which provides the startup comfort that any confidential information revealed to the investor will not end up in the hands of a potential competitor, as well as limiting the investor’s exposure by spelling out clearly to whom the confidential information may or may not be disclosed. Defining Confidential InformationThe parties must also carefully define what confidential information is protected under the NDA. For startups, this can provide particular challenges; products and services may be developed over the course of the term of the NDA. The definition of confidential information must be broad enough to cover variations and emerging confidential information, while still maintaining a definition which is focused on the concrete engagement between the parties. Both parties benefit from clarity here; too broad a definition of confidential information can potentially expose the investor, while a narrow definition can leave the startup unprotected. ExclusionsThe NDA should also set certain exclusions to protected confidential information in order to limit the investor’s obligation to safeguard certain information which may already be in its possession or which may become insignificant to the startup in the future. Typical exclusions will include public information or any information which the investor already knows at the time of disclosure. In the high-tech industry this exclusion is of specific importance as sophisticated investors often have a detailed understanding of a startup's industry and will not want to be penalized for any pre-existing knowledge. On the other hand, startups need to make sure that the exclusions are not drafted too broadly as to negate their confidential information. TermsThe rest of the agreement will include terms for both sides to follow: how information is to be protected, permissible use of the information, the parties’ duties after the agreement expires and what actions the disclosing party may take in the event it reasonably believes its confidential information has been jeopardized. The two sides have diverging interests, so negotiating terms fair to both sides helps create conditions that allow the sides to work together. Creating well drafted, effective NDA’s allows startups and investors to start working together towards a future investment. Contact Barnea & Co.’s experienced team to help you start your relationship on the right foot. Source: barlaw.co.il
January 4, 2017 / by Ariella Dreyfuss
8 Things that Happened in the Israeli Hi-Tech World in 2016
8 Things that Happened in the Israeli Hi-Tech World in 2016
It has been an interesting 2016 in the Israeli Hi-Tech world, here is a rundown of 8 things that happened, in case you missed them. Angels’ Law: In early 2016 an amendment to the "Angels’ Law" clarified the scope of the tax benefits available to private investors in new early stage start-ups; clearing the ambiguity that surrounded the law and had rendered it ineffective. Cash investments by angels in young Israeli companies in their initial research and development (R&D) stage can be recognized as deductible expenses for tax purposes, in an amount of up to NIS 5 million over a period of three tax years. The amendment is a temporary order and will remain in force until the end of 2019. SAFE: The Y Combinator’s “Simple Agreement for Future Equity” (SAFE), popular in Silicon Valley has become more acceptable in Israel. The “positive evolution of the convertible note” is not a debt instrument, it does not accrue interest, is not secured and is not repayable. It is essentially a deferred equity investment. While some argue that the SAFE is too entrepreneur friendly, others note that the protections offered by a convertible note are of little significance, as if the start up fails there is often little recourse for the lenders, if any. Hi-Tech Brain Drain: Avi Hasson, the Chief Scientist of the Ministry of Economy and chairman of the Israel Innovation Authority, voiced his concern that the “seven good years are over and that we are approaching our glass ceiling”. He explained that unless the government takes immediate action to educate Israeli students in the sciences, there will be an acute shortfall of engineers and programmers in the next decade. Drop in foreign VC Investment: The IVC Research Center noticed a drop in foreign investor participation in Hi-Tech capital raising in 2016, particularly by foreign VC funds. According to an IVC and KPMG report in the third quarter of this year VC-backed deals attracted $662 million, reflecting a 41% decrease from the previous quarter and a 24 percent year-on-year decrease; the lowest number in the past three years. However, Koby Simana, CEO of the IVC Research Center noted that this is a reflection of a global downtrend and not unique to Israel. Interest from the Far East: Interest from the Far East in Israeli Hi-Tech continues to spike. Hundreds of investors and entrepreneurs from the Orient have visited Israel this year to scout talent and the set-up of various incubators, accelerators and funds, including Techcode and The Kuang-Chi GCI Fund & Incubator, which has already invested around $4.3 million in the Israeli video analytics company - Agent Video Intelligence (Agent Vi). While Sony acquired Altair Semiconductor for USD 212 million earlier this year, just this month Taiwan's HTC Corporation and Quanta Computer invested US$30 million in Israeli augmented reality company Lumus which follows a US$15 million investment from China's Shanda Group and Crystal-Optech in the same company in June. Disinterest in IPOs: IPO’s are facing a downtrend, with few Hi-Tech companies choosing to go public as an exit strategy. An exception to the rule is trendIT, an analytics company that floated on the London Stock Exchange in the first quarter of 2016 raising $5.9 million at a $17.6 million valuation and smart VoD company Vonetize that raised NIS 16 million on the Tel Aviv Stock Exchange; a far cry from the highlight of the Mobileye IPO on the NYSE in 2015, which raised $1.02 billion at a $5.3 billion valuation. Crowdfunding: Israel is seeking to soften the regulatory hurdles to crowdfunding and will allow small start-ups to crowd fund without the need to issue a prospectus (which can be an expensive and time consuming task). Although the applicable regulations have been slow coming (a year now) it is believed that the Securities Authority has some sympathy for the trend. The current expectation is that investments of up to NIS 10,000 per investor for each investment, and NIS 20,000 per investor in the aggregate per annum will be exempt from the need to issue a prospectus. In addition, the relevant company will be limited in the aggregate amount it can raise through crowdfunding per annum, and the expectation is that the cap will be several million NIS. In the interest of protecting the public, the regulations will require that at least one accredited investor participates in the crowdfunding and that such crowdfunding is executed through an internet portal regulated by the Securities Authority. New Licenses in FinTech: With the aim of combatting financial crimes and money laundering and regulating the growing field of FinTech, a new law – the Control of Financial Services (Regulated Financial Services) Law - was adopted in August. The new law requires that credit providers and providers of financial asset services hold a license (as of June 2017 and June 2018 respectively) and will be subject to supervision by a new financial regulator. The licenses are subject to certain thresholds, including minimum equity (starting from NIS 300,000) and corporate requirements (for example board composition). Now bring on 2017! “Originally published on the TOI website”
The purpose of the Israeli Restrictive Trade Practices Law is to encourage and maintain competition in the country. The law does not explicitly relate to foreign corporations and businessmen and, therefore, its ex-territorial application is becoming more and more critical. The Israeli Antitrust Commissioner has issued a number of rulings stating that the law should also apply to operations that are not entirely implemented within Israel, but whose outcomes adversely affect competition in Israel; for example, a restrictive arrangement organized between a foreign company and an Israeli company that is liable to adversely affect competition in the relevant local market. This means that the fact that one of the parties to a restrictive arrangement is a foreign company, does not, per se, allow it to evade application of the Israeli law. Therefore, a restrictive arrangement organized between an Israeli corporation and a foreign corporation, which results in significant harm to the competition in the Israeli market, is subject to the Israeli Restrictive Trade Practices Law. Israel is not a pioneer in this regard. The customary position in international law regarding the ex-territorial application of antitrust law is that these laws may be imposed on a business being conducted outside of a country’s borders only when there is clear evidence of linkage between that business and that country’s local market. And indeed, many countries around the world are enforcing the local law against international violations of competition laws, primarily cartel violations. Today, most cross-border transactions contain a spectrum of stipulations, such as: exclusivity, noncompetition, most favored nation (MFN), geographic market allocations, goal discounts, minimum quantities, price coordination, retail price maintenance (RPM) and more. In many instances, stipulations of this kind are legitimate for the purpose of ensuring stable business operations and constitute a precondition to the parties’ willingness to invest their money and efforts. However, in some instances, such stipulations may reach the point of being deemed a restrictive arrangement that violates provisions of the law. If an Israeli corporation and a foreign corporation organize a restrictive arrangement in violation of the law, this is liable to lead to grave ramifications. Even in instances when all of the parties to the restrictive arrangement are not Israelis, but the restrictive arrangement adversely affects the local competition, the parties are liable to find themselves exposed to Israeli sanctions on a number of levels: At the civil level – the Antitrust Commissioner has the power to rule that a particular activity constitutes a restrictive trade practice. A ruling from the Commissioner to this effect may be used for the purposes of private enforcement of the law through a class action lawsuit or any other tort claim. Furthermore, the organization of a restrictive arrangement is liable to result in the nullification of all or a portion of the agreement between the parties to the restrictive arrangement. Recently, the Israeli court ruled that in the instance whereby the restrictive trade stipulations cannot be isolated from the rest of the agreement, the entire agreement shall be nullified. At the administrative level – the Antitrust Commissioner is authorized to impose financial sanctions in respect of various violations of the provisions of the law. The Commissioner has the discretion to decide the precise sum of the financial sanction, while the law prescribes the maximum, coupled with an open-ended list of guidelines for imposing sanctions. At the criminal level – a restrictive arrangement organized outside of Israel’s borders that could prevent or constrain the competition within its borders, constitutes a local violation pursuant to the Israeli penal code and therefore, is subject to the authority of the court in Israel. A conviction for an unlawful restrictive arrangement is liable to result in a fine or even incarceration. Notwithstanding that stated, the Israeli Restrictive Trade Practices Law regulates various mechanisms designed to serve as escape routes in instances whereby the extent of the harm to the competition does not justify the imposition of criminal sanctions. However, the Israeli legislature preferred mechanisms for advance prevention over retroactively issued exemptions. Consequently, anyone who does not succeed in operating using the legal mechanisms still has an escape route, but must take into account that this route is rarely allowed. In light of the rising trend of imposing stiffer punishments for violations of the Restrictive Trade Practices Law, foreign businessmen are advised to plan their strategies well and to consult with attorneys specializing in Israeli antitrust laws, before they engage in a commercial agreement with an Israeli entity. Barnea & Co. provides legal advisory services to Israeli and foreign companies inter alia, in relation to restrictive trade practices, including restrictive arrangements, and represents clients before the Antitrust Commissioner, if requested. You are invited to contact us to obtain legal advice in this regard and in relation to other matters. Source: barlaw.co.il
Your website exists to help your clients and customers find and interact with you. You may include e-commerce capabilities, or you may primarily seek to inform people about your company and your products and services. Whatever your goals are, though, you must be on guard; people naturally seek to rely on what they see online. This can be a good thing, but you need to create parameters around what they can and cannot rely on your site to do. The means you have to protect yourself in this regard are your terms and conditions. When you give your customers a clear description of what they can and cannot expect to receive and depend on, you provide yourself with another layer of protection from potential liability. VisibilityFor terms and conditions to help you, your customers must be able to find them. This can be a display on your homepage or a link to the page that provides them. Sometimes you may also seek to require the persons using your website to positively confirm their acceptance of your terms and conditions. ClaritySimilarly, you must use language your customers can understand. If you use vague or complicated language, you will not receive any benefit of doubt from a court. In clear, concise verbiage, your terms and conditions must lay out what your site viewers need to know. Compliance Finally, you need to ensure your terms and conditions do not run afoul of any laws or regulations in your industry and in the applicable jurisdictions. This can be complicated; people can access websites from all over the world, and different countries have different laws that pertain both to your industry and to online communications and privacy rights. With all of the concerns you face in drafting terms and conditions, you are likely not prepared to craft effective and compliant terms without legal assistance. Barnea & Co. can assist you in identifying the laws and regulations that apply to the terms and conditions on your website, and in adapting those according to the purposes your website serve. Contact our professionals today to give your site and your business the liability protection you need. Source: barlaw.co.il
December 8, 2016 / by Yuval Lazi
Three Technological Predictions for the Next 5 Years
Three Technological Predictions for the Next 5 Years
The world around us is changing. In labs and living rooms around the world, people are creating new technologies and finding new applications for existing and emerging technologies. The products and services available to everyone thus expand exponentially every year. In the next five years, then, you can expect massive growth in what we can do. Three areas in particular will provide important developments. 1. Augmented Reality Will ExplodeTechnology mavens have talked for years about virtual reality and the applications available. Augmented reality is related, but allows us to lay the virtual world over the real world. Games like Pokemon Go provide examples of how this works; you use technology to "see" virtual creatures and items in real spaces. Beyond fun and games, this technology provides a wealth of planning potential. You can drive your car, and arrows will appear on your road, guiding you to the right path. You can create visual representations of organizing tasks, building endeavors, and almost anything else that you want to see before you start working. Manuals will virtually overlay real items to be joined together – everyone will actually be able to construct an Ikea bed. The technology is here; ways to use it are just beginning to emerge. 2. Mobile Apps Will DeclineAt the same time, the ubiquitous world of mobile apps will begin to slip back. The ways in which we connect to the world often require us to work through a smartphone or tablet. The mobile app ties us to devices; you have no doubt seen rooms full of people who never make eye contact, only staring at small screens. The cost of developing sophisticated apps and the marketing efforts needed to place your App on the most expensive “real estate” in the world, does not always give a return on investment. 3. The Internet of Things Will Grow ExponentiallyAvailability and affordability of connected devices grow each year. We connect massive data networks to our homes, vehicles, and personal health monitors already. The ability to connect more devices, appliances, and objects to these networks means companies will know more about those they serve than ever before. Almost any device with electronic components can be configured for the IoT, and in the next five years, more will. All of these developments will require you to examine closely not only what is possible, but how privacy laws, intellectual property issues and the corporate ecosystems interact with those possibilities. Barnea & Co. has a wealth of experience in helping companies avoid problems and get the most from their developing technologies. Contact us today to get on the right path for you. Source: barlaw.co.il
November 30, 2016 / by Daniel Lorber
Crowdfunding: Funding Companies in the Startup Nation
Crowdfunding: Funding Companies in the Startup Nation
For many small businesses around the world, crowdfunding - the pooling of usually small investments from a large group of investors - facilitates the ability to start a business without large institutional investments in the company. The portfolio of crowdfunding investors is diverse and is comprised of a broad array of ROIs (returns on investment). Investors may be donating to a specific cause, seeking repayment with interest or claiming equity in the company. In the past year, Israel has loosened some of its regulatory impediments which existed under the Israeli Securities Law and regulations in order to enable and promote crowdfunding as a viable investment alternative for startups and small businesses. Under the new regulatory regime, investors can now come together to help fund companies in the startup nation, without the offer by the company to potential investors being deemed an Initial Public Offering. The Israeli Legal UpdateCrowdfunding has long been difficult to do in Israel. Section 15 of the Israeli Securities Law required until recently that the Securities Authority approve a prospectus for any offer of shares to more than 35 investors. This process made investment onerous for startups unable to access funds from venture capital funds and large financial institutions. In late 2015, Israel enacted its new Law for the Encouragement of Investment in High Tech Companies. This new law is actually an amendment to the Securities Law. It provides an exception for small investments, thus clearing the way for crowdfunding to occur without the prospectus requirement. It allows for tradeable venture capital funds to be created, which should further encourage group investments in new and emerging companies. The law also encourages startups to remain in Israel by making local funds more available; companies that may otherwise have sold or moved to more funding-friendly locations now have fewer incentives to leave. Crowdfunding Boosts in IsraelAs with any financing structure, investors and companies who wish to invest or raise funds through crowdfunding need to take the time to understand the legal and commercial implications of this financing tool before diving in. Crowdfunding in Israel still requires at least one accredited investor to participate in a fund. The idea of a completely deregulated funding scheme has not yet taken hold. Furthermore, investors need to remember that, in a crowdfunding scenario, they may have limited rights compared to other investment routes. Since the latest regulatory changes, a significant increase in crowdfunding investments has already taken place. In 2014, the aggregate investments through crowdfunding worldwide amounted to USD 10 billion. This number grew by 350% in 2015 and reached a staggering USD 35 billion. We have seen a dramatic increase in Israel as well during this period and expect to see these numbers increase in Israel and worldwide as the regulatory barriers which currently exists are gradually lifted.If you are interested in raising funds or investing through crowdfunding, you need to navigate a new legal structure that is still being defined. Contact Barnea & Co. for help in getting started. Source: barlaw.co.il
The issue of officers’ responsibility in general, and of directors in particular, is one of the key issues addressed in companies and securities laws in Israel. The subject has been deliberated, analyzed and gradually expanded over the years and, without doubt, onerous and extensive responsibility is imposed on directors in the current legal environment. Over the years, a clear trend has developed of legislators and courts expanding the responsibilities of corporate directors, which developed due to the abundance of legislation, regulatory bodies and activist court rulings. Directors in Israel have fiduciary duties, a duty of care and a duty of disclosure towards the corporation, but this is merely the minimum entry requirement for the formerly coveted role. Coupled with these obligations, we are seeing a substantial expansion of directors’ obligations relating to such issues as: exploiting business opportunities, responsibility over the company’s reports, the collective responsibility of the board of directors, responsibility for board decisions about distributions, and more. Opposite the expansion of these responsibilities, layers of protection for directors have been added since the inception of the Companies Law, which allow companies to release directors from liability, to indemnify and insure their incumbent directors. However, these protections are qualified by various conditions, provide only partial coverage, and the spectrum of circumstances that cannot be insured or for which directors may not be indemnified at all has been steadily growing. A salient point is that the law does not make it compulsory for companies to provide protection for their directors, but rather, only permits companies to grant protection. In other words, directors are obliged, in certain circumstances, to bear the liabilities, but are not guaranteed protection. Recently, an amendment to the Companies Regulations was enacted that slashes in half the sums of the minimum statutory remuneration being provided to outside directors for their participation in board meetings and in board committee meetings. The said reduction applies to corporations whose equity is up to NIS 275 million, the aim being to provide relief to such corporations. Reducing the financial burden imposed on public companies is welcome and necessary, but it is a mixed blessing. We do not believe that the expense item that should be targeted in order to provide relief to companies should, of all expense items, be the statutory remuneration being provided to companies’ directors. Considering the trend towards expanding the directors’ responsibilities we mentioned earlier, this anomaly becomes even more stark. Moreover, it appears that the 50% cut in directors’ remuneration is liable to deal a mortal blow to those corporations who are in desperate need of talented professionals to chart and navigate their business course. It is precisely in those same “small corporations,” where matters being submitted for deliberation and resolution by directors are particularly challenging, considering the company’s tenuous situation, when often a single erroneous business decision can lead to the company’s demise. It would be more logical if precisely these small corporations should be allowed to pay their directors a higher remuneration than other companies with higher equity or, at the very least, to equalize the sums being paid to directors in those companies. The financing in this regard could be in the form of a subsidy of the difference by the Israel Securities Authority or the TASE, similarly to what was done recently with Project Analysis. Such subsidy could help small companies retain high-calibre directors on the one hand, and constitute an additional temptation for new (or existing) small companies to raise money on the Tel Aviv Stock Exchange, which is earnestly seeking new companies. We also point out that, although the reduction of the remuneration relates to a cut in the remuneration to external directors only, the remuneration being paid to them (that is prescribed in the regulations), is customarily used as a benchmark for setting the remuneration for all other directors in the corporation, and it would not be unreasonable to assume that the said amendment will also have broad implications on the limit of the remuneration being paid to “regular” directors of the corporation, and not only to outside directors. Another possible solution, but which requires those involved to “switch gears” – is to grant equity remuneration to directors as an integral part of companies’ remuneration policies. Over the years, the subject of granting equity remuneration has been considered exclusively in connection to active directors (mainly, the chairman of the board). In a period when the legislature (coaxed by the regulatory authorities) is attempting to cut costs on the one hand, and to induce companies to grant remuneration based on long-range targets on the other hand, it appears that the time is ripe to grant equity remuneration to directors (including to outside directors) and not only to officers such as the CEO and subordinates to the CEO. In this way, everybody benefits from the upside if the company succeeds and, if the company fails, its cash flows are not affected. In an age when excessive conservativism is having a paralyzing affect, the granting of equity remuneration would encourage directors to approve “unconventional” transactions with the potential of adding considerable value to the company and to its shareholders, while taking into account the spectrum of considerations relevant to that transaction and maintaining a healthy business appetite. Source: barlaw.co.il
November 16, 2016 / by Ilan Blumenfeld
Performing a Legal Due Diligence – Think before You Act
Performing a Legal Due Diligence – Think before You Act
We have encountered numerous instances recently whereby investors were about to make an investment without performing a prior legal due diligence examination. There are various reasons put forward by investors for not performing a due diligence examination, such as: the contemplated investment is in a young company, insufficient budget, cost-benefit considerations, the volume of the investment, timetables, long-standing work relations between the investors and the corporation, and the like.As a rule, whenever we encountered a decision to not perform a legal due diligence before investing, the decision turned out to be wrong. Undeniably, every investment involves some risk, but the degree of risk may be mitigated by performing a comprehensive examination of the business being acquired. A legal due diligence process allows the investors to learn about the corporation in various aspects, including: the identities of the corporation’s shareholders; its relations with the banking system; the approvals required from third parties; the corporation’s pledged assets; the corporation’s licenses and the potential impact of the transaction on their validity; its workforce and their employment terms, including exposures relating to the company’s obligations to its employees, both by law and by virtue of the employment agreements with such employees; the corporation’s tax exposures; the structure of the agreements with the corporation’s suppliers, including the degree of risk involved in working with a few material suppliers; the corporation’s customer base and the terms of engagement with them; the corporation’s exposure to past lawsuits; necessary actions in order to protect the corporation’s intellectual property rights, including the registration of patents, trademarks and copyrights; and the like. The outcome of the due diligence examination should have a major impact on the nature of the contemplated transaction, inter alia: on the structure of the transaction (share purchase transaction or asset purchase transaction); on the transaction price; on the representations that will be required of the business being acquired and its owners, on the collateral to be provided to guarantee the investment; on the suspensive conditions to consummation of the transaction; indemnity clauses; the mechanism of the investment and, in the final analysis, on the very decision about whether or not to proceed with the transaction, considering the results of the due diligence examinations. In this context, we further advise that in 2014 the Israel Antitrust Authority ("IAA") published a public statement addressing information disclosures between competitors during the performance of due diligence examinations prior to executing a transaction. According to the IAA statement, the importance of a due diligence examination to the efficient operation of a business on the one hand, and the concern about competition being compromised as a result of a due diligence being performed between competitors, on the other hand, obliges competitors that are conducting due diligence examinations of each other, to carefully and meticulously consider their actions. The main discussion in the IAA’s foregoing statement targets the tension between the prohibition of becoming a party to an unlawful restrictive arrangement, and the need for an adequate factual foundation of knowledge for the purpose of forging a transaction between the competitors. Barnea & Co. has extensive experience performing due diligence examinations, including antitrust aspects. The performance of a legal due diligence examination is a critical component of the investment strategy and plays a decisive role in optimizing your bargaining power during negotiations. Source: barlaw.co.il
November 7, 2016 / by Simon Jaffa
Doing Business in Israel: a Nation Friendly to Business Investment
Doing Business in Israel: a Nation Friendly to Business Investment
Companies, countries, and individuals who are interested in doing business abroad are looking more and more towards Israel. This has not occurred by accident. Israel has devised and implemented national policies to make it a world leader in technology and innovation. The result is a nation friendly to business investment. With the right business and legal guidance, investors are discovering tremendous potential in this small but sophisticated country. Israel's Economic PerformanceIn the last 10 years, Israel's economy has grown 100 percent - more than that of the United States or any other developed nation. This includes a remarkable 13 consecutive years of growth. Further, the International Monetary Fund predicts the country will grow another 3 percent on 2017. This does not mean that the economy in Israel cannot contract, but over time conditions have pointed consistently upward for economic development. Human CapitalSimilarly, Israel has fostered a workforce highly trained in technology. Compulsory service in the Israel Defense Force steers the brightest young scientific minds into tech training. The top intelligence units in the IDF are known as the best school for entrepreneurship, naturally driving the graduates to leverage their experience and establish successful startup and high-tech companies, upon finishing their military service. An Ecosystem of InnovationDespite its size, Israel ranks high on the list of the best countries for doing business. This ranking emerges particularly as a result of Israel's focus on innovation and start-up business growth. The infusion of venture capital funding has further built up its capabilities, with foreign investments rising about 30 percent per year. The result is a nation honed to push ahead of the pace the rest of the world sets for scientific development. Israel's Regulatory EnvironmentBefore you can do business in Israel, you need to take the time to understand the local culture and business environment. Recent changes have made Israel more complicated in areas like taxation and obtaining permits. In many ways, this is a natural by-product of its success; as national economies grow, it is necessary for regulation to become more sophisticated. Israel is experiencing and navigating growing pains, and while its government adapts, its regulatory environment for business will involve some flux. Barnea & Co. has the experience and expertise to guide you through the potential pitfalls to realize the potential Israel offers. Contact us today to learn how we can help you. Source: barlaw.co.il
Your company faces potential threats every day from hackers and online criminals. Whether they are interested in stealing money, absconding with information, or just harassing and creating embarrassment for your organization, you need to be prepared to stop them. While you can gain a measure of protection by investing in antivirus and anti-malware software, your cybersecurity strategy needs to be built into your technological infrastructure. Investing now in a sound, broad-based approach to cybersecurity concerns can save you headaches, customers, and money. Your Legal RisksAccording to the 2015 Global Risks Report from the World Economic Forum, the risk of cyberattacks, both in frequency and in severity, is only growing. As the devices and networks involved in what you do every day become more complex, more data is at risk, and there are more points of attack where cyberattacks can create problems for you. The problems themselves can be severe. Under Europe's new General Data Protection Regulation, companies have duties not only to protect their customers' information but to respond and report quickly in the event of a breach. Failures in either area can result in large fines and other sanctions against the company. Further, failure to protect private or confidential information can lead to lawsuits against your organization for negligence, breach of privacy, or breach of contract when contractual obligations include the protection of confidentiality for customers or trade partners. Creating the Right Cybersecurity StrategyWith the risks involved, creating a comprehensive strategy to combat cyberattacks is critical for your organization. This should begin with mapping and analyzing your entire system, identifying how and why data is stored. Beyond this, your strategy should include testing to identify potential vulnerabilities. Scan your system constantly for evidence of existing infiltration. Work with programming experts who can attempt to breach your defenses, and can then create patches to eliminate those weaknesses before a cyberattack can occur. On top of that, you must have in place the means and personnel to handle a cyber-attack crisis, if your system is breached. This should include, of course, what is required in order to repair the breach and end the data leakage, but also public relations experts and lawyers, in order to handle the crisis and what will most likely immediately follow – reputational issues, possible loss of business as well as lawsuits. And all of this must be handled in a quick and efficient manner; any delay has the potential to create catastrophic damage to your business. Preparing your company to prevent cyberattacks and what happens after them represents one of the most important security investments you can make. Contact Barnea & Co. today to learn more about how we can help you protect your company. Source: barlaw.co.il
Despite the fact that water covers three quarters of Earth's surface, countries all over the world suffer from potential or current water shortages. Water consumption well outpaces supply, particularly in arid nations that struggle to meet their agricultural water needs. Israel, as a nation more than 50 percent covered in desert, has grappled with this problem since its beginnings. The technologies it has developed in response allow it to flourish, and it is doing more every year to expand those technologies around the world. Technologies to Gain Usable WaterThe two ways to adjust to the conditions that lead to water shortages are straightforward: creating more usable water and conserving the water that is available. Israel has long worked for ways to get the most out of the water available to it. Mekoret, for example, is a state-owned company that focuses on all aspects of water provision. It has created and applied water desalination techniques, deep drilling techniques, and an abundance of water treatment and purification techniques that increase the total amount of water available to the country. It has been developing the technologies it uses for over 50 years. Other private companies like Amiad Water Systems focus on particular aspects of the process--filtration in Amiad's case. Ways to Use Less WaterCleaning and reusing water provides an important strategy that nations are learning to use more and more efficiently, often following the leadership Israel provides in this area. The country's best known water technology, though, is drip irrigation. This technique focuses on applying water directly to crops, rather than flooding the area. The concept, led by Netafim, is that you should use only the amount of water needed for the plants consuming it, rather than enough to flood the entire area. While the precise savings has yet to be scientifically determined, the concept in a world where 80 percent of water usage is agricultural holds significant promise. Israel's leadership in water technology provides a fertile source for startups and investment opportunities that stand to help the world address an ongoing environmental problem. Barnea & Co. has broad experience in guiding investment strategies and legal considerations in water tech areas. Contact us today to learn how we can help you approach these opportunities wisely and legally. Source: barlaw.co.il
September 22, 2016 / by Ronit Offir
Class Actions in Israel- Overview and Contemporary Trends
Class Actions in Israel- Overview and Contemporary Trends
The Israeli Class Action Law came into force in 2006, and formally regulates the proceedings applying to class actions in Israel. This type of action was available in Israel before 2006, but was much less developed. Since the advent of the Law, class actions have become a favored path of pursuing litigation where the damage caused to a single plaintiff is not significant and would usually not result in a claim against the party which caused the damage. The majority of class actions filed in Israel are consumer claims against corporate entities. Court ProceduresThe procedure begins with a preliminary motion to the court to certify a class action. The defendant then has the opportunity to respond to this motion, and normally both parties can make oral arguments in court regarding the motion. If the court grants the motion, the proceeding continues as a class action, and the court determines the scope of the plaintiff class. The court’s decision is made public in news media as well as in official circulars, and any claimant who believes that they fall within the class may apply to join the represented class. A defendant in a class action motion has 90 days to file a response, listing the legal and factual arguments against the approval of the class action. As a rejection by the court of the motion to approve a class action ends the legal proceeding, such a decision carries a right of appeal. We note that most class actions in Israel end in settlements, and very few ever reach a court ruling. Consumer ClaimsMany consumer claims against corporate entities include "Loss of Autonomy" as one of the causes of actions. "Loss of Autonomy" is a concept which is intended to address cases in which a person was deprived of his right to make an informed choice with respect to his body. It was first recognized in medical negligence cases and may be traced to concepts of bodily integrity and one's dignity. It constitutes both the cause of action and the type of harm caused. Since damages were first awarded in a class action for loss of autonomy, in 2008, in the Tnuva v Rabi case, this cause of action has become integral to class actions filed by consumers against manufacturers and distributors. It has been ruled that even if the claimants have suffered no quantifiable damage, the harm caused by loss of autonomy is of the 'pain and suffering' type, exemplified by negative emotions such as disgust, helplessness, and anger. This type of harm entitles a claimant to compensation for non-monetary damages. Following the Tnuva case, in a number of consumer class actions, the possibility of claiming non-monetary damages due to the loss of autonomy was recognized. Implication of Filing a Class Action in IsraelSince the Law came into force, the number of class actions that have been filed has increased significantly. According to official records, 7,400 class action Motions have been filed since 2006, of which 5,300 occurred in the last four years alone. In order to deal with this "flood", the Minister of Justice is examining the possibility of setting a court fee on the filing of a class action Motion- in the sum of 50,000 NIS in the Magistrates' courts, and 62,500 NIS in the District courts. Currectly, no court fees are required when filing such a motion, and this is a first step in bringing the class action back to a reasonable proportion and easing the burden of the courts in dealing with increasing numbers of motions. Source: barlaw.co.il
September 13, 2016 / by Asaf Shalev
How Brexit Might Affect the UK’s Environmental and Energy Law
How Brexit Might Affect the UK’s Environmental and Energy Law
The European Union (EU) has driven environmental policy across Europe since its inception in 1992. With the United Kingdom's (UK) referendum of withdrawal from the EU, though, how it responds in its energy and environmental legal and regulatory structure could affect not only the UK, but the European and even the global marketplace. The UK's Energy NeedsThe UK, under Article 50 of the Lisbon Treaty, has two years to negotiate the terms of its withdrawal. Initially, then, it will still operate under the treaties and laws in place with the EU. Imports accounted for 61% of the UK's overall energy consumption as of 2014, with 71% of its imported natural gas coming from the EU and Norway, in particular. The negotiations will thus need to take into account this current dependence and likely will include some adherence to the EU's standards currently in place. Options include a limited free trade agreement similar to the accord between Canada and the EU (known as the ‘Canadian model’); individual-sectorial, bilateral agreements with the EU (known as the ‘Swiss model’); or retaining membership as a non-member to the European Economic Area (known as the ‘Norwegian model’). Because the UK is one of the largest suppliers of natural gas in the EU, it retains some negotiating power as it seeks the agreement most advantageous to its own energy and economic needs. Impact on Climate and Environmental ConcernsThe UK has to this point been one of the more ambitious proponents of energy regulation and climate change. Brexit means the role it can play in seeking to regulate carbon emissions on the continent and in the world will diminish. The British approach to emissions testing could include establishing its own independent system, in which it negotiates a tie to the EU system, or some hybrid approach. While the result will not come out immediately, the decisions and treaties put into place could greatly impact the EU energy policies that emerge and, as a result, global environmental policies. The world's approach to environmental regulation currently faces a great deal of uncertainty. Political developments over the next two years will create ripples through the world's energy markets, in terms of costs of doing business and environmental impact the EU and UK create. Source: barlaw.co.il
August 30, 2016 / by Refael Kriman
Trademark Protection: Registration and Enforcement
Trademark Protection: Registration and Enforcement
Part of how any company moves from start-up to growing and thriving is to create a recognizable brand under which it operates. The brand provides a way to identify and distinguish yourself with customers, and it all begins with images that you use to represent yourself--and no one else--to the world. To prevent others from using the same or similar images, though, you need to obtain trademark protection. A trademark is a kind of intellectual property protection that lets you defend your marketing ground against others who want to benefit from your symbols and imagery. Obtaining a Trademark in IsraelIsrael is a member of the Madrid Protocol, which currently includes 97 members, covering 113 countries. These members represent more than 80% of world trade, with potential for expansion as membership grows. This membership contributes to Israel's tradition of supporting business investment. Companies want to protect their branding and intellectual property, and registering for legal protection recognized throughout the world helps achieve this by allowing filings from far beyond the country's borders. Indeed, in 2014, out of 23,018 trademark applications in Israel, 13,659 came from abroad, and another 6,982 were filed by non-residents. The process of obtaining a trademark can be time-consuming. Once you file a trademark application, the waiting period before your application is examined lasts 18 to 24 months. Once the trademark is granted, your protection extends for 10 years. At the 10-year anniversary, you must then file a renewal application for each 10-year period afterward. The protection includes the exclusive ability to transfer or modify the mark as well. Enforcing Your TrademarkTrademark protection, even though filing occurs through an international system, exists solely within Israeli borders. Different methods allow you to act to defend your trademark if it appears someone else is using it for their own purposes. One option is to file a civil enforcement action in court. You can seek a temporary injunction order to force the other person or company to stop using the mark, and if you prevail, you may be entitled to both a permanent injunction and monetary damages. In addition, Israeli Customs has jurisdiction over imported goods that use your mark. Finally, trademark infringement constitutes a criminal offense; the Israeli Police contains an IP division that prosecutes knowing violations of trademarks. Israel has a long tradition of supporting businesses and helping protect intellectual property. Barnea & Co. will help you through the trademark registration process as well as enforcement proceedings to protect what is yours. Source: barlaw.co.il
Israel's ‘startup boom’ has grown unfettered for decades. Its emergence as a nation of opportunity for business creation and innovation came not by accident, but through careful planning, tendency to think ‘outside the box’ and constant strive towards execution. All of which have been accomplished due to ability of Israel to support and grow qualified and innovative individuals. After years of steady growth, though, the country now faces some challenges to its positioning in the technology sector. Shortages in their high-tech labor pool and a need for companies to grow more within the country are forcing adjustments. How Israel navigates these concerns will have a significant impact on the year ahead for high-tech companies. Challenges in Human CapitalOne significant challenge area lies in the need for more qualified personnel. Israel trains thousands of individuals through compulsory Israel Defense Forces service, but tech sector growth has created a need for much more. Scientific and mathematical degrees earned have leveled off; the proportion of scientific and technical degrees among overall college degrees has dropped below 10 percent in recent years. As a result, the supply is not keeping up with the continued demand for more workers in this area. Current trends suggest a shortage of 10,000 engineers and programmers in the coming decade. After 13 years of continued growth in Israel's economy, investment and national leadership will need to focus on reversing these trends to develop a labor pool that keeps up with the appetite for national startup innovation. Need for Companies to MatureAnother issue for those looking to invest in Israel to consider is the increasing exit costs for businesses. New regulation and tax burdens now create incentives for companies to develop further before exiting the economy. Where short-term investments and profitable exit strategies once carried the day, your investment focus now should move toward a longer plan, increasing profitability over years rather than months. The government is developing plans to create new growth paths; as with any maturing nation, these will work to marry growth to stability. In the coming year, those who invest for the long term will find greater high-tech opportunities. As the regulatory and taxation systems change in Israel, you need experienced legal and consulting assistance to guide your strategy. Barnea & Co. can help lead you through the new paths to growth in Israel. Contact us today to learn how we can assist you and your business. Source: barlaw.co.il
The Internet of Things (IoT) has emerged as a popular technology buzzword in the last decade. As with many such phrases, it has garnered widespread usage with little understanding of what it actually signifies. Far from meaningless terminology, though, IoT already pervades the consumer marketplace, and growth opportunities abound. Israel's sophisticated tech sector provides fertile ground for continued expansion in IoT investment and development. What is the Internet of Things?In simple terms, IoT consists of objects with the ability to collect, process, and share data across the Internet. Items like the Fitbit and home security monitoring systems are examples. Currently, software and apps hold almost 80 percent of this market. This leaves room for hardware and platforms to explode in the coming years, particularly in areas like healthcare, consumer electronics, and security. Israel's Emergence in IoT TechnologyFurther technology development in many sectors focuses on ways to further connect you to the world in which you live. Emerging trends in this area must balance people's interest in privacy with their desire to participate in the growing connectedness of the world. Health information, for instance, now moves online among providers and patients to monitor biometrics, prescription schedules, and a myriad of other markers to track healthcare. The technology opens doors, but also must prevent those doors from opening to anyone but those for whom the information is intended. This delicate balance makes Israel a logical world leader in the IoT arena. The country has long been a leader in both general technology and online security innovation. Its national demands for security, and its intense investment in technology development training, as well as the inherent inclination of Israeli entrepreneurs to seek the next big thing, have been a boon for local startups and foreign investors seeking paths for sensible growth. To take advantage of the sophistication Israel offers in IoT development, you need experience and knowledge in the legal, regulatory, and geopolitical landscape for doing business in the country. Contact Barnea & Co. to learn how we can guide your Israel IoT development strategy.
If you think about fertile land for agricultural development, Israel probably doesn't immediately come to mind. But perhaps it should. Despite a desert climate and the relative youth of the country, Israel's technological development has created a boom in agricultural innovation, with technology that helps farmers and companies develop healthier, higher-quality foods. With the challenges facing the world's farming and crops markets, this tiny country provides a wealth of opportunity moving into the future of agriculture. Addressing Agricultural ChallengesAgriculture today needs technology to succeed. Climate change is creating growing uncertainty in how and where plants will continue to grow well, and natural resources are diminishing over time. On the other hand, the world population continues to grow. This means that, absent technological solutions, the farms of the world will struggle to keep up with demand in the decades to come. To address these concerns, technological developers must lead the way. Irrigation techniques continue to advance, reducing further the dependence on natural water supplies near farms. Bioengineering strategies are also emerging. Farmers today can scientifically approach crops to make them healthier and increase their overall quality in safe, effective ways. Why Israel Makes SenseIn its sixty-eight years of existence, Israel has had to create and use technologies to grow crops. An arid desert climate requires engineering to help agriculture meet the needs of its population, so as early as the mid-1960s, companies like Netafim were revolutionizing irrigation technology in Israel. The country leads much of the world in agricultural technologies, and continues to push ahead to meet more of the surging world demand for science and farming to intersect.From its work to feed its own citizens, the agricultural technology market in Israel has expanded. Its companies, like Afamilk, Evogene, and Biobee, have grown in both size and number, and are now capable of managing and running farms all over the world. Hundreds of Israeli agtech startups emerge each year. In 2015, a Harvester Venture fund of $40 to $50 million was established, and a pledge by Bayer of another $10 million was made in 2016. Israel's agricultural technology prowess represents a growth area well into the future. Investors and nations looking to capitalize on Israel's capabilities need to work within its legal and regulatory system to fully realize the potential there. Contact Barnea & Co. to learn how we can help you develop in this space. Source: barlaw.co.il
Purchasing a residential property is generally one of the most profound, expensive and important decisions you make in your life. Even more so when purchasing a residential property in Israel. Following is a check list containing 10 most important tips on how to do it the right way: 1. Locating the right property- there are a few ways to proceed. The first way is via various web sites, which usually do not involve payment of a fee. Another way that is more common is via a real estate agent. It is important to confirm that the agent has a valid real estate license and is proficient in English. You must be aware that purchasing a property using a real estate agent increases the costs of the transaction as the agent’s fees range between 1% to 2% (V.A.T exclusive) of the purchase price. However, this extra cost can prove to be worthwhile, especially when dealing with a professional, experienced agent who has a thorough knowledge of the property market. 2. What to buy - it is very important to understand what you want to buy, for example a house or an apartment, whether to buy an apartment off plan (or under construction) from a contractor or to buy a finished apartment. Your choice to buy an apartment or a house can have important consequences. It is important to know that when purchasing an apartment from a contractor (off plan or under construction) there may be many unforeseen problems (such as late delivery, structural defects, financial problems of the contractor etc.). But the advantage of buying an apartment from a contractor is a lower purchase price (approx. 15%) when compared to a pre-existing property. Also, you can buy the apartment in a “shell” condition and design it to fit your personal requirements. 3. Property inquiry - it is very important to engage an engineer or similarly qualified professional. to check the quality of construction and to make sure there are no building irregularities. If you wish to buy a house it is important that you have its size measured to ensure that the correct specifications are recorded with the authorities, such as the Land Registry. 4. Engaging with the right lawyer - it is extremely essential that you engage a competent, experienced lawyer to represent you. It is vital that you are guided and assisted throughout the process, from the negotiation stage until the conclusion of the transaction, by a lawyer who will both protect and advance your interests. The lawyer’s fees generally range between 0.5% to 1.5 % (V.A.T exclusive) of the purchase price. 5. Financing - the purchase price for the property can be paid fully in cash or via a combination of cash and mortgage finance. Usually the lender will grant a non-resident a loan which will not exceed 50% of the purchase price. Receiving approval for mortgage funding from local banks for non-residents cannot be taken for granted and is not always successful. 6. Signing the contract - it is important to know that the provisions of the contract are negotiable and are not “cast in stone”. All the necessary legal checks in respect of the property should be carried out prior to the signature of the contract. For example, whether there any existing property mortgages, foreclosures or anything else that could affect the transaction. It is important to ensure that the structuring of payments under the contract is reasonable and attainable. 7. Receipt of possession -it is very important that at the time of delivery of the property the seller and buyer have drawn up a delivery protocol, which will specify any defects which need to be remedied by the seller. At the time of delivery you should arrange for the transfer of all utilities, rates accounts into your name. 8. Taxes - currently, non-residents are required to pay purchase tax of 8% of the purchase price up to NIS 4,896,165 and 10% of the purchase price which exceeds NIS 4,896,165. 9. Opening a bank account- in recent years the requirements for opening a bank account by non-residents have become quite stringent. The bank requires the foreign resident to sign a waiver of confidentiality towards the Bank, a statement about the place of residence and a deposit of a cash amount in the account. Alternatively, you can arrange for your lawyer to open a trust account to effect payments. Please note that opening a trust account will entail the signing of similar documents as are necessary when opening a personal bank account. 10. Post Purchase Issues- (I) Receipts - upon a subsequent sale of the property, you may have to pay Capital Gains Tax. However, for this purpose you are entitled to deduct various expenses, such as renovations, purchase taxes, legal fees, agent’s fees etc. It is therefore critical that you retain all relevant receipts, which must be under your name and must include all relevant details relating to the property and of course, keep a copy of all taxes paid upon the purchase as well as the purchase agreement and your passport.(II) Insurance - you must insure the property and its contents. Non-residents who do not intend to occupy the property on a continuous basis should ensure that someone inspects the apartment once every two weeks, otherwise the premiums will be more expensive and in some cases insurance cover may be refused. (III) Taxes - if you intend to rent out your property to a third person, you have a duty to report your income to the Israel Tax Authority if the rental exceeds approx. NIS 5,070 per month. Source: barlaw.co.il
Financial technology (“FinTech”) is a broad term that encompasses many kinds of technology across many industries. It includes hardware and software, apps and analytics, and solutions for companies of all sizes. Because FinTech plays a role in virtually every kind of company, it is worth taking the time to understand its position in the world economy. 1. Everyone Uses ItThe financial sector is the most obvious place one would look to understand FinTech's rise in prominence. Indeed, large banks and lenders in many ways lead the growth in demand for FinTech solutions, and have developed many of them. But if you look at the opposite side of the coin, every kind of company relies on financial applications. Companies in all industries look for better, more efficient ways to collect revenue and make payments. Much of this is now paperless, meaning that cloud technology, smartphone and tablet apps, and on-site hardware solutions matter to anyone whose business involves money. 2. The Regulatory ChallengeFinTech operates in heavily regulated areas, perhaps more than any other area of developing technology. As a result, when you bring products and solutions to the market, dealing with the regulatory challenges already in place across myriad disciplines is a must, rather than an option. You need to consider and resolve the legal challenges as you define the product, rather than waiting for a later stage of development — or worse, until you are taking the product to market.Further complicating this issue, as with any area of emerging technology, national and international regulatory agencies are struggling to keep up with financial services regulation. Although it seems that technological offerings level the playing field between large financial institutions and lean startups, most of the regulatory regimes tend to focus only on one-size category. Accordingly, the laws and rules that govern FinTech companies and innovators are necessarily in flux while companies emerge and grow. You need to plan to address issues that create moving targets in your development. 3. Israel's Increasing PositionAs is the case with many kinds of startups, Israel is developing quickly in FinTech. The country's focus on innovation and entrepreneurship has led naturally to growth in this vital sector. Further, because the world relies more every day on FinTech products and solutions, global demand for this kind of innovation shows no sign of abating anytime soon.Beyond the technological innovations required, because money is involved with the development and use of FinTech, any new product needs to offer solutions to cyber security threats that abound in the financial sector. Israel has long maintained a national interest in battling on the cyber security front. Its emergence as a leading producer of startups has included a surge into a leading position on security issues as well.Because it is so well positioned in these areas, Israel's highly trained technology workforce has grown into the FinTech industry. In the first quarter of 2016 alone, Israeli startups raised over $1 billion, with FinTech capturing a large portion of that windfall. Those numbers should only grow as companies and individuals develop more specialized understanding of the industry. With all the technological expertise available, Israel offers a natural place to develop FinTech companies and resources. To take advantage, you will need expertise in both the local and international legal aspects of building in FinTech. Barnea & Co. can help you navigate the industry so you can grow quickly. Source: barlaw.co.il
Forming a start-up begins with a great idea. This may be a product or a better way to do something, and it represents the seed from which your company grows. But planting the seed is just the first step. Moving from creating a company to running it as a CEO requires careful, diligent work in a number of areas. Your transition into leadership will often make the difference between your company's success and failure. Investor ManagementYour investors have provided some of the capital you needed to start your business. They are now your company's owners, and have a stake in your performance. Accordingly, you need to manage their expectations as you grow. Communicate regularly to let them know what you are doing and why, and ask questions. They invested in your idea because they see a path to your success; they will appreciate the opportunity to help, and will stay more engaged in the investment. Manage Your BoardYour board of directors can create obstacles if you are not all on the same page. You must remember that disagreements you may have come in the context of everyone wanting the best for your company. Part of this is regular communication outside of the meeting context. Work with them to decide what reports they want. Then, prepare and distribute agendas before board meetings so everyone knows what you need to cover and can make the most of the time. Financial and Tax adviceThe CEO has a responsibility to maximize the profit. There is no greater loss, then tax loss. It is fair and reasonable to pay what you owe, but a wrong financial turn, can set you on a path towards undesirable tax implications. Nobody likes paying taxes, its true for companies to. Consult with your accountants and international tax advisers. Plan your corporate structure and holdings, to maximize your tax benefits and minimize your exposures. Legal ConsiderationsFrom your company's beginning, you will be required to identify and comply with numerous legal requirements and legal hurdles. This begins with your founders’ agreement and articles of incorporation. You need to form the right entity and follow all the regulations from the get-go. You need documents to be as clear as possible, because what you agree to at the outset may not be so clear later. If you want to do business in Israel, national and international legal issues factor in. Feel free to contact me if you have any questions or in need of any assistance. Source: barlaw.co.il
Our world today looks very different from what we knew even twenty years ago. Climate change has emerged as a concern across the globe. With this, though, new opportunities have risen for investors and entrepreneurs in the area of clean and renewable energy. Israel has embraced this more than any other country by fostering growth and embracing policies to encourage and develop new small business in this area. More and more, Israel has stepped forward as the world's leading clean tech nation. Encouraging Innovation and Clean EnergyIsrael has earned a reputation for encouraging start-ups and commercial innovation. Its technology sector in particular benefits from training its brightest citizens during compulsory Israel Defense Forces service. Those citizens carry their training into the private sector and lead the country's push to develop new business ideas.A significant part of this push now moves into clean energy companies. Israel's Ministry of Energy and Water Resources is working as part of national policy to push development of clean and renewable energy sources. The purpose is twofold. From an environmental perspective, this push will help Israel reduce air pollution and decrease the health burden that pollution places on its citizens. And from an economic perspective, boosting local businesses as they strive to create and implement new clean energy technologies reduces national dependence on imports and increases investment from outside entities that can further bolster Israel's financial future. Clean Tech Success StoriesThe policies in place are already paying off for Israel. According to the 2014 Global Cleantech Innovation Index, Israel holds the best opportunities in the world to start and develop clean tech companies. Among the report's findings:Israel ranked first overall among the 40 countries studiedIsrael scored well above all other countries in emerging clean tech innovationIsrael reuses about 97% of its wastewater, far above standards in other countriesOther countries are taking notice. Investment in Israel is booming, through individual investors and international agencies alike. Despite having fewer natural resources available than many other nations possess, Israel is already generating over 2% of its total electricity from renewable sources, largely due to its technological innovation and development.If you are looking to invest in clean energy opportunities, you need representatives who understand Israel's legal and regulatory systems and the international marketplace. Barnea & Co. can help you tap into the clean energy innovation available here. Source: barlaw.co.il
It is possible to believe the innovations of the Sharing Economy are due to a collective and empowering business model that places the emphasis on the individual and that this is a revolutionary outgrowth of information accessibility. However, one would be dismissing the very economic fundamentals that are the foundation for future growth and prosperity of the larger global economy. There are four important things to know about the Sharing Economy. Solution DrivenThe sharing economy is driven by solutions to needs that are not necessarily addressed by traditional businesses. In some cases, these solutions can coexist with existing traditional businesses e.g. Uber or AirBnb. There is no suggestion that traditional hospitality and transportation businesses under serve consumers, only that specific need situations fall outside of the traditional need and are thus better served by the sharing economic model. Failure Is UnforgivingIn reference to the sharing economy, failure in the public eye is impactful to a much more significant degree than it is on traditional corporate structures and models. The fact that the businesses operating in the sharing economy rest on the trust of the customers, as well as the buzz relating to such businesses, makes them that more susceptible to suffering blows where they act, or fail to act, in a manner which is conceived by the public as problematic. Therefore, such businesses must be able to handle any crisis in a far more efficient manner than "regular" businesses. For instance, if a person using a transportation platform suffers from a crime committed by the driver providing the transportation services, then – from the perspective of the business operating the platform – things could deteriorate quickly to a mass exodus of users of the platform on account of what could be conceived as a failure of that platform; this is especially true where there are several competitors vying for such customers. Unclear Regulatory ConcernsEither by design or oversight, sharing economy concerns are commonly running afoul of existing regulatory emplacements. In 2014, the Harvard Business Review expressed the concern that sharing economy actors are often seen as exploiting the regulatory loopholes and are, therefore, creating a negative perception of said actors. Further still, since the exact regulatory structure for the sharing economy is in a dynamic state, the risks for regulations that prohibit company growth are real and potentially devastating. Many regulatory concerns are focused on the specific aspects of the company, the relationship between the company and the customers and service providers providing services via the company's platform, as well as the nature of the company's business; and the applicability of existing regulations as per traditional businesses in a similar sector. However, in absence of traditional regulatory authority, the sharing economy presents a question of what regulations if any are needed to address regulatory concerns or future issues. Taxation ConcernsOne area of specific concern is taxation and responsibility for said taxation. Much of this revolves around the employee/employer designations. Should taxes be the responsibility of the independent contractor or should the company be responsible for taxation? This is a critical component and one that is still being evaluated by various entities. The collective consumption foundation of the sharing economy has generalized potential and it certainly functions well in a regional or localized setting. However, for long-term corporate viability, the issue of growth sustainability is still in doubt. At present there is plenty of room for both positive and negative considerations. Thus, it's important that your voice as both a consumer and business owner is clearly heard, so that the sharing economy can be shaped into a sustainable, beneficial and continually growing part of the global economy. Source: barlaw.co.il
Engaging in any business startup can be risky, and even more so when you are attempting to initiate a startup in the technology sector. Available risks cross both B2C and B2B vectors, and while the risk percentage can fluctuate between said vectors, it clearly illustrates the wide array of risks present for your technology startup. When these risks are combined with potential missteps by the founders of the technology startup, a perfect storm can be created that only terminates with the complete failure of the endeavor. Mistakes Do HappenMistakes in any endeavor are bound to happen, but there are several key mistakes that are most certainly responsible for a significant portion of startup failures. Many of these founder mistakes apply across all startups in any location. The top 10 mistakes startup founders inadvertently make are:Failure To Partner With the Right Co-founders: Failure to connect with trustworthy individuals who have the relevant skill set.Failure To Understand Current Trends: Inability to translate future market demands into marketable or operational results.Failure To Have Clear Objectives: Not having set goals and knowing how and when they are reached.Failure To Account For External, Non-Related Pressures: For example, working with partners who have other business activities and inability to fully contribute.Failure To Identify The Customer: Not understanding the targeted consumer and their needs.Failure To Implement The Appropriate Marketing Strategy: Not setting marketing goals and benchmarks to determine effectiveness.Failure To Establish a Clear Founders Agreement: Not laying out the roles and responsibilities between founders at the outset.Outsourcing Core Element: If your team relays on outsourcing for core elements of the product, your chances of raising funding decreases.Attempting To Shorten Incubation Limitations: Trying to grow the business too quickly.Unwillingness to Finance Boot Strapping Independently: Not willing to show ‘skin in the game’ may raise difficulty in initial fund raising.Indeed, there are other mistakes that startup founders can make that will contribute to the decline of startups, and while the above might seem obvious, these are among the most common.It is incumbent on you to endeavor to avoid these mistakes. One of the best ways to make sure you are avoiding the pitfalls is to work with and engage with qualified professionals who understand what is at stake and how to provide solutions to the problems outlined above.
Keep. It. Simple. (Stupid). Entrepreneurs, you are creative and innovative, but when raising financing it is ok to follow the norm. There is no need to try and reinvent the wheel. Standard also works. I would even argue that from an investment perspective it is superior. When there are too many moving parts, you run the risk of getting side tracked.I understand that securing financing is not always enough, you want to procure added value from your investors, for example manufacturing, distribution and marketing networks. It is easy to get tempted by alternative structures, or to try and roll too many transactions in to one. You invest in us, we will simultaneously incorporate a joint venture to do A, B and C together and we will grant you a separate license to our technology for X,Y and Z. It sounds attractive as you have opened up various distribution channels for your product. However, the details can act like quick sand, sucking you away from closing any deal at all, while consuming your time and resources. For most start-ups it is difficult enough to procure investment. You have to convince potential investors that there is a real market need, your product answers that need in a way that outshines your competitors, and that your company valuation is justified. Current reports also suggest that startup investment is cooling. The last thing you require is additional obstacles. If there is synergy before the equity investment, there will be synergy after. I understand that the demands may come from the investors, who are making a strategic investment in a technology they may ultimately want to commercially exploit, but try any buy yourself time. If you cannot buy time, you can still try and keep it as simple as possible. Remember this is the start of what will hopefully be a fruitful relationship for all involved, you do not want it to turn sour from extensive negotiations. Standard also usually means tried and tested. I have been part of many transactions where advisors have offered all types of creative models, usually for tax reasons. One, it later transpired, had serious and unintended consequences and had to be revised at the last minute. Almost all have delayed the actual investment. At the end of the day, no matter how complex your corporate structure, if “management and control” remains in Israel, when you make your exit the Israeli tax authorities are going to come knocking. Thinking long term, consider that if you give too much to the current investors (rights of first refusal/offer on distribution, an exclusive license etc.) you run the risk of deterring future third party investment - particularly from strategic investors (and will set a precedent). A plain vanilla subscription agreement is your friend. Focus your innovation and creativity on your product. Keep the investment terms simple.
China has a long-held reputation in the international community for being closed off from outsiders — a reputation that it cultivated for thousands of years. In recent decades, however, this past custom has rapidly been changing and China has become a world leader in manufacturing and production, leveraging a large population and an immense technological skill base. Today China is pushing for more growth, looking to drive innovation to launch its economy into the future. This has led to a trend of opening up to the world, and in keeping with that trend, China has begun to reach out to Israel. Today Israel is only the third country with which China has developed a multi-visit visa program to encourage business and tourist travel. This highlights the importance of Israel's role as an innovation center for new technologies, particularly in the fields of Agrotech, Healthcare, Fintech and cyber security, and China’s desire to strengthen its cooperation with Israeli technology companies. In March, Prime Minister Benjamin Netanyahu and Chinese Vice Premier Liu Yandong announced that Israel and China were starting negotiations for a bilateral free trade agreement. A free-trade agreement between Israel and China may not only increase the gross national product of both countries, but also would most likely double the total value of traded goods between both countries, which currently stands at $8 billion. Challenges to NavigateThe two countries have much to offer each other, and the ability of Israeli companies to offer technological solutions which are applicable to the needs of the Chinese market is of significant interest to the Chinese government and Chinese investors and companies. Despite the many advantages which such cooperation can yield to both countries, there are many obstacles which hinder the cooperation between the two countries, such as cultural gaps which have a material effect on negotiations and the ability to locate a strategic partner on the other side, as well as differences in each party’s expectations with regard to a given transaction. Whereas many Israeli entrepreneurs and companies set their companies up for future exits, Chinese investors are in search for technologies that could benefit the Chinese market and therefore are looking for long term projects that are not necessarily focused solely on their return on investment. In addition, another challenge which is inherent to Israel- China collaborations is the need to be familiar with Chinese laws and regulations and the ability to navigate the heavy bureaucracy which is associated with operating in China. In order to overcome the above challenges it is highly recommended to receive counsel from professionals who possess the know-how which in bridges the cultural and legal gaps between the parties, and who can advise on certain material issues which are synonymous with doing business in China, such as proper tax structures, or expatriating funds which were generated in China. For assistance in these challenges, please speak with the experts at Barnea & Co., and we will get you started on the right path.
Sources of renewable energy include, among others, wind energy, solar energy, and hydroelectric energy. With different groups fighting to maintain or increase their relevance on the world energy stage, many myths about these energy sources pervade our understanding of how, and how well, they work. Five myths in particular emerge consistently, and should be overcome for you to better understand how the world is powered. 1. Renewable Energy Is ExpensiveMany forms of renewable energy require up-front investments, whether for individual consumers, companies, or governmental organizations. But those investments tend to pay off quickly in energy cost savings. Further, as competition increases for providers of equipment and services in this industry, those up-front costs are diminishing steadily. 2. It Is Still NewRenewable energy use actually predates our reliance on fossil fuels. For centuries people have harnessed wind, sun, and water to provide energy, going back as far as medieval windmills in the Netherlands. Modern technological solutions include the Hoover Dam, which has been providing electricity since the 1940s; and commercial solar plants have existed since the 1980s. 3. It Is UnreliableThe wind does not always blow, and the sun does not always shine. Still, technology has improved and continues to improve constantly. For example, we are now able to store enough solar energy on a sunny day to continue to produce at night, and harness enough wind to continue to power over time. 4. It Doesn't Create Much PowerAccording to the U.S. Energy Information Administration, about 21% of the world's energy generation in 2011 came from renewable sources - and much more in countries that have adopted renewable energy policies (Germany for example). Renewable sources cannot yet completely replace fossil fuels or nuclear energy, but this provides a significant portion of the world's energy. These sources allow smaller companies and nations to emerge with a greater role in the global market. 5. It Is InefficientTechnological developments allow energy to be stored, backed up, and distributed over time. And once the initial apparatus is set up, you can produce steady levels of energy over time without having to add in resources in the way non-renewable sources require. Over time, renewable sources become much more efficient than other sources of energy.Barnea & Co. has vast experience in providing legal support and advice for the development of energy infrastructure projects. Contact us to help bring your renewable project concept into reality.
E-Commerce sites of both B2C and B2B oriented businesses still remain a positive growth vector across many industries and concerns. This will continue as more and more locations are provided with access to the Internet and as the bandwidth available correspondingly increases. However, the rising traffic is only one small factor in increasing overall e-commerce sales. A comprehensive approach to sales generation and lead transition is necessary to produce a sustainable increase in both the number of new transactions and the number of older or repeat consumers. Centered around the five steps listed below, a properly implemented strategy could significantly improve sales for your business. The Five Key Steps For Increasing Sales At Commerce Sites Importantly, it is the combination or varied combination of these steps that are capable of producing results. It is also conceivable that your business currently employs one or more of these steps. However, an overall analysis could potentially identify which of the other steps could be used or combined with existing implementations in order to achieve significant results. The five key steps are: Improved Automation LevelsProper Inventory Management ProceduresDynamic PricingCustomer/Consumer Value CreationImproved Customer Service Response Inventory Control With the exception of customer/consumer value creation and improved customer service response, the rest are invisible to the site traffic. However, they play a critical role in increasing sales. Automation levels are a component of both the proper management procedures and dynamic pricing. If the automation levels are insufficient and reliance on manual pricing changes is the norm, the customer will not derive the price changes that can affect their buying decision in sufficient time. For example, some marketing research has mentioned that it is possible that companies such as Walmart and Amazon will adjust pricing up to every ten minutes. This is referred to as dynamic pricing, one of the key steps. Value and Service Response Traditional methodology such as discounts account for increased consumer value creation. Importantly, this should correspond to inventory levels to become part of your inventory management procedures. This is facilitated by the dynamic pricing. Of course, Improved Customer Service Response should be obvious, however, it should be organic to your company as to the specific implementation and practices required to present the consumer with a flexible and responsive customer service. Altogether, these five steps can help improve your commerce site sales.However, it is up to you and your company to ensure proper implementation in order to achieve the desired objective of a sales increase at your commerce sites.
Israel is brimming with high tech ideas and you want to be part of the action, one way to do so is by providing a start-up with early seed money.But you need to protect your investment.The Target. Choose a start-up in a field that you understand, it will help you evaluate its chances of success. Remember founders can be picky too, they prefer angels who bring something to the table other than just money - contacts, distribution channels, expertise etc.Investment Deck. Ask for an investment deck and check it addresses the following questions to your satisfaction: What is the market need? How does the proposed product fill this need? What are competitors doing? How is the proposed product better? What is the proposed business model and budget?MOU. This should be a non-binding document that does not commit you to invest, but includes the material terms of the transaction. This is signed even before the material due diligence is conducted to ensure that everyone is on the same page and to avoid wasting valuable time and resources.When drafting the MOU you should consider:1. Lump sum v Installments. You do not need to part with your hard earned cash in one go. You can be more conservative and condition your investment on the company meeting certain milestones. 2. Equity v Convertible Loan. You do not need to commit now. You can invest by way of a convertible loan. This may be less risky as (i) you can ask for repayment if you are not happy with the company’s performance, or (ii) you can convert into equity at the next investment round, on the same terms as the round and at a discount. 3. Company Valuation. At this stage the number will almost always be subjective. The founders will not want the valuation to be too low, because they do not want to give away too much of the pie. On the other hand you do not want it to be too high as: (i) you want a nice piece of the pie and (ii) you do not want a down round in the future (where the valuation drops), as this will dilute your holdings and may also deter future investors as it will reflect poorly on the company. 4. Anti-dilution. Whether full ratchet, broad based weighted average or narrow based weighted average, these anti-dilution protections will preserve your percentage holdings in a down round, or mitigate their dilution. 5. You want the target to have an employee share option pool and plan. You want the target to incentivize its employees and to attract the best talent. What you do not want is that the pool is created at your expense (i.e. by diluting your holdings). So ask that the company allocates a pool prior to your investment. 6. Do you want a seat on the board, to be an observer or would you be happy with information rights? Remember board members have duties as well as rights. If you are on the board, make sure the company agrees to indemnify you for your actions and purchases sufficient Director and Officers insurance. 7. General Terms. Most angels are minority shareholders, so make sure you include restrictive provisions preventing the company from taking certain actions without your consent - for example, changing the business of the company or selling the IP. You are taking a high risk at this stage so you want to guarantee a high reward, you could ask for dividend preference and liquidation preference. However, remember that your terms will set a precedent for the next investment round and the founders will be reluctant to give away too much. 8. Founders. Part of your decision to invest will inevitably be based on the identity of the founders, so make sure they will be around for the foreseeable future. Request a no sale undertaking, whereby they agree not to sell their holdings in the company for a certain period. Demand a co-sale right, so if the founders have a nice exit, you can benefit from it as well. Most importantly make sure the founders are dedicated, that they are engaged by the company on a full time basis and that this is not simply their hobby. You can also ask that if the founders cease working for the company within a certain period, the company will have the right to repurchase their shares. 9. No shop/Exclusivity. Despite the non binding nature of the rest of the MOU, the founders and company should undertake not to negotiate with other potential angels for a fixed period, buying you enough time to perform your due diligence and negotiate the definitive investment agreements without being undercut.Due Diligence. It might be that there is not much to review at this stage but performing due diligence (legal, financial and commercial) will put you in a much better position to gauge whether the start up will succeed. Is there a real market for the product? Does the company actually own the underlying intellectual property? What are the company’s current debts?Remember this is the start of a relationship, not an exit. No one likes to be bulldozed and the founders will be protective of their baby and may take flight if you are too demanding. Tread carefully but protect your money.
Building a startup company takes vision and great ideas. But before you can get up and running, it also requires legal understanding and planning. Startups need to go through steps to protect the owners and the organization. Before you start doing business, make sure you have worked through these preliminary steps. Create a Legal EntityWhen you set up a business, you should create a separate legal entity under which you will operate, typically a corporation or an LLC. Identify the place you want to incorporate and set up to legally operate in all of the places you want to do business. You also need to set up your finances to ensure the assets of your company remain separate from your personal assets and file all the relevant paperwork to set up. This keeps someone from being able to attack your personal assets over a dispute with your business. Agreements and ContractsBesides protecting yourself from outside risks, you need to make sure inside disputes cannot derail you. Any agreements you have with co-owners or investors need to be in writing and should contain terms which you are comfortable with. You should include a vesting schedule within your agreements in order to prevent someone from getting cold feet and leaving early with his or her ownership interest. You also want to set rules for bringing in new or replacement owners. In addition to setting up, startups need to anticipate and plan for ending operations. What criteria need to be in place for the business to sell? How will owners divest their interests if you choose to part ways or close down? Startups eventually end operations, and you need to plan before the moment arrives. Protect Your Intellectual PropertyWhen you plan your company, you do so with ideas in place. Before you begin operating, you need to develop patent, trademark, and/or copyright protection for the products or methods that will come from your ideas. This ensures no one else can steal and run with them before you are able to build up your business. Ensure Legal ComplianceFinally, you need to understand the laws and regulations that govern your operations. If you are non-compliant, whether in corporate, tax, or securities law, you can lose the business and more. Barnea & Co. has extensive expertise in helping startups begin with the right legal footing. Contact us today to help turn your ideas into a solid business.
Most people who think about leading global players in online security concerns think big: the United States, China, and Russia. Quietly, though, Israel has emerged as a world leader in this area. Known as “Start-up Nation” since the release of Dan Senor and Saul Singer’s 2009 book of the same title, Israel has created a culture of technological development and growth. It promotes learning and understanding in technology, both culturally and through its recruitment of top minds in service to the Israel Defense Forces (IDF), resulting in a country continually pushing the technological curve forward. Service and TrainingIsrael requires that all citizens over the age of 18 enlist in the IDF. The compulsory service requirement opens a large pool of candidates for high-level training. From this group, Israel’s 8200 intelligence unit has the opportunity to choose the best among them to train and serve in cyber intelligence. In turn, many of the best of these develop into the online security leaders for the government and private companies. Invention From NecessityIsrael’s focus on cyber security is no accident. Uniquely situated among nations often hostile to its interests, Israel must remain vigilant against the threat of attacks from military operations and computer operations. Its culture of innovation led to its myriad start-up successes, but the IDF focus comes from a nationwide focus on security, a focus that has led inexorably to the current mantle of the cyber security nation. Growth PotentialSeveral successful, high-profile intrusion events concerning various corporate and government networks clearly illustrate the burgeoning market for cyber security solutions. According to a recent January 2016 article on the leading Israeli business site, Globes, there were over 430 cyber security oriented enterprises, with 19 post IPO. The oldest Israeli cyber security company is Check Point Software Technologies (Nasdaq: CHKP), who (again according to Globes) has a market cap of over 15 billion. Since 1993, Check Point Software Technologies Ltd. has expanded to the degree that they operate in hundreds of countries with technology partners such as IBM, Microsoft and others. Check Point is not the only cyber security company that has seen growth, as all the other companies, including Cyber Ark Software Inc. (Nasdaq:CYBR) have also experienced considerable growth.Israel’s national focus has led to a surge in online security development and expertise. The world continues to require more focus in these areas, and Israel is leading the way. Source: barlaw.co.il
On March 17th Adv. Micky Barnea delivered a lecture for start-ups and entrepreneurs at the Azrieli College of Engineering, Jerusalem. The event was sponsored by Atobe Accelerator. The lecture dealt with the use of options as a tool to encourage employees and service providers of start-ups. Various issues were discussed, including the differences between shares and options and the differences in the expectations and perspectives of entrepreneurs, investors and employees of a start-up venture. During the lecture Micky explained the basic terms of options (vesting dates, exercise price etc.) and the benefits to the company of adopting a stock option plan. https://www.youtube.com/watch?v=c6vSY5NluhE&feature=youtu.be
February 23, 2016 / by Maya Zisser
What you need to know about buying your first home
What you need to know about buying your first home
Buying an apartment is usually the biggest purchase of one’s life, and for most of us it represents a significant financial outlay. Therefore, once we’ve found an apartment we like but before we’ve signed a contract, it’s very important to check out several angles. The surroundings:We recommend wandering around the neighborhood, both during the day and at night, and to speak with the neighbors and the co-op board (va’ad habayit in Hebrew) to find out if there are any problems with the building or its residents. Also, are there plans to renovate the building? What are the municipality’s plans for the immediate surroundings? Are there cell phone towers or high voltage power lines near the apartment and/or the building? What public institutions (schools, preschools, community centers, playgrounds, libraries, houses of worship, shopping centers, clinics, etc.) are nearby? Is there convenient public transportation? It is especially important to find out if construction is planned for the immediate vicinity. Contact the local Planning and Construction Committee, a fixed feature of every local government, to gather this information. The apartment:The physical condition: It is important to check the apartment’s physical condition. We recommend that an engineer do this to make sure there are no serious construction flaws.The state of planning: It is also important to check that the building and apartment were built with all the legal permits and there are no building code violations. This can be ascertained by looking at the building’s file kept at the Local Planning and Construction Committee. We recommend that an assessor or engineer do the check. If there are building code violations, the purchase agreement must contain a written clause that clarifies the understanding between the buyer and the seller about who bears responsibility for redressing these violations.The legal standing: It is important to ascertain that the apartment is registered to the seller in the relevant rolls at the Land Registration Office (commonly referred to as tabu in Israel), the Israel Land Authority, the housing company, and other similar sources. It is also critical to see if the seller’s rights to the apartment are in any way attached or mortgaged, and if there are any other obligations vis-à-vis the sellers rights to the apartment (such as liens, tenants’ rights, caution notes, etc.). This check is usually carried out by the real estate lawyer representing you. Make sure that, as part of the purchase agreement, the seller commits to removing all obligations and attachments related to the rights to the apartment, such that you take over the property only after its rights are free and clear of any third-party rights or obligations. Purchase taxAnyone purchasing an apartment is obligated to pay a purchase tax. The difference between the purchase tax for a buyer who owns only this property and the purchase tax for a buyer who owns another apartment is quite significant. Therefore, we recommend you consult with your real estate lawyer to see what purchase tax you may have to pay for buying this apartment. Mortgage:If you intend to finance part of the payment for the apartment with a mortgage loan, we recommend you ask the mortgage bank you intend to borrow from to preapprove you before you get to the contract stage. By all means, compare the terms offered by the various mortgage banks and choose the bank making the offer most attractive to your own personal circumstances. Furthermore, it is quite customary to negotiate with the banks over the terms they offer, and doing so can save you a significant amount of money. Important points in the purchase agreement:The seller’s declaration: It is important to incorporate a seller declaration in which s/he declares that the apartment and its systems are in good repair, that there are no building code violations associated with the apartment, and that there are no conflicting rights and/or registrations associated with the property.Transfer of ownership and property rights: It is important that the document state that the apartment must change hands empty and clear of people and objects, with all systems fully functional and operating as they did when the buyer saw them.Payments: It is important that the first payment be held in trust until a caution note in your favor is entered into the Land Registration Office and only then handed over to the seller. Similarly, it is important that the last payment be made only in return for transferring ownership and property rights and taking delivery of the keys, with the rights of the seller to the apartment free and clear of any third-party rights or obligations. It is important to leave a certain sum of money in trust to ensure you receive all the approvals the seller has to provide in order to register the property rights in your name (the lawyer representing you can advise you on how large a sum to deposit).Registering the property rights in your name: It is important the seller has a deadline by which s/he must provide all relevant documents for you to complete the process of registering the property rights in your name.Mortgage: It is important to get the seller’s commitment to sign all relevant documents that the mortgage bank will demand before granting you a mortgage loan. Given the importance and complexity of buying a home, we recommend you be represented by a lawyer specializing in real estate to represent your interests alone (rather than those of the seller too) in order to safeguard your interests and rights.
So you posted on Facebook that you’re looking for a place to live. You read the fine print of every ad on yad2.co.il. You asked everyone – from your grandmother to your elementary school bestie – for help, and you were probably one of 50 people who showed up to see the place. And now the place is yours for the asking!But before you commit, make sure to check these tips so that in the future you don’t regret signing the lease:Working with a realtor:Before signing a letter of engagement with a real estate agent, make sure that:The realtor holds a valid real estate license.The letter of engagement you sign specifies the rent (i.e., monthly payment), the lessor (i.e., the property owner) and the term (i.e., time period) of the lease.The tenant pays the realtor’s fee only after s/he has signed a binding lease with the lessor.If the lease depends on certain conditions being fulfilled, it is important that you demand that your obligation to the realtor be binding only if those conditions are met and that you pay the realtor’s fee only after the conditions have been met in a timely fashion and the term of the lease has begun.Inspecting the property and its surroundings:Before signing the lease, we strongly recommend that you, the prospective tenant, inspect the property thoroughly. This includes checking all systems, such as the AC, water heater, the electrical system, electric blinds, and so on. It is also important that you make sure there are no water stains or drips and leaks. We recommend you bring another person to the inspection so that you can hear a second opinion about the property.It is also important to find out about ambient noise levels, determine if renovations or construction are planned in the immediate neighborhood, and check for cross ventilation. Also, talk to the neighbors and see if any of them is planning or is in the midst of renovations, including enhancing the building’s earthquake resistance (National Construction Guideline 38, abbreviated in Hebrew as TAMA 38).The lease:We recommend the lease includes the following:The lessor’s information and his/her rights to the property (it is important to make sure the lessor actually owns the property and is therefore entitled to rent it to you).The term of the lease as well as an option to extend or renew it. It is important to make sure that the option is solely in your hands, rather than jointly or solely in the lessor’s hands, otherwise it’s pointless.The rent for the term of the lease (including any annual escalations) and for the extension option if offered to the tenant.The possibility of leaving before the term of the lease is over and/or the possibility of sub-letting the property and/or finding an alternativ tenant to take over the lease in every way. It is important that the lease includes the lessor’s agreement to allow the tenant to terminate the lease without any penalty should the need to renovate and/or participate in a TAMA 38 project suddenly arise.When the term of the lease begins and the tenant receives the keys, the parties should sign a memorandum in which the tenant states the flaws and/or damage to the property that the lessor is obligated to repair.Lease guarantee: It is necessary to come to an agreement on the nature of the guarantee the tenant must provide. In most cases, this involves a deposit or bank guarantee equal to three months’ rent, or, alternately, a promissory note equal to six month’s rent. It is necessary to make it clear in the lease that the lessor may use the guarantee only if the tenant has breached the lease and the lessor has informed the tenant of this in writing and has also provided a window of a few days to redress the breach. It is important to note that the demand for a guarantee is negotiable between the parties and it is important to clarify the terms up front.Insurance: It is important to make sure the lessor has purchased a structure insurance policy. It is customary for the tenant to purchase a third party and house contents insurance policy. We recommend checking the cost of purchasing such a policy.Contents: Find out ahead of time if the property is being rented together with any contents. If it is, a list of the contents and its condition should be drawn up. It is important to clarify this point during the negotiations so that the tenant can plan accordingly (i.e., demand that the contents be removed once the term of the lease starts or, alternately, inspect its condition).Reasonable wear and tear: It is important that the lease include the lessor’s obligation to undertake repairs to the property needed as the result of reasonable wear and tear that occurred despite the tenant’s reasonable use, as well as the time frame in which such repairs can be expected. It is also important to make sure the lease includes a clause stating that the lessor’s failure to fulfill this obligation entitles the tenant to choose a service person to make those repairs and to demand the lessor provide a full refund for the expense incurred.Lease breach: It is important that the lease contain a clause stating that a claim that the tenant has breached the lease must be submitted in writing by the lessor who must also provide several days for the tenant to redress his/her breach.Tip: Before signing a long-term lease involving a significant monetary commitment, it is important to consult an attorney specializing in this field. Such an attorney can draw up the contract, conduct the negotiations, and ensure that your interests are safeguarded
"Funding your organization" - a lecture in Hebrew by Micky Barnea given to the program of the Executive U.S. Embassy Alumni.The lecture took place at the Tel Aviv-Yafo Municipality's Center for Young Adults, with the participation of William Grant, Deputy chief of Mission at the US Embassy. https://youtu.be/xosL4R7umnA
In recent years, more and more couples are opting to live together without getting married, for a variety of reasons. The State of Israel has enacted clear laws addressing the division of property for instances when couples who are legally married decide to separate; however, if a couple decides to not be formally married, they are deemed a “common law couple,” and then matters become more complicated. Property rights of common law couples, in the event of a separation or, heaven forbid, if one of them dies, are anchored mainly in case law and not in legislation. In Israel, unlike in many other countries, the term “common law couple” is neither defined nor uniformly regulated in legislation. In Israel, the definition of a “ common law marriage” has evolved over the years within the scope of court rulings, which prescribed two main criteria for recognizing a common law marriage: (a) intimate conjugal relations as a husband and wife, in a manner that shows that the couple indeed consider themselves a married couple for all intents and purposes; (b) cohabitation – the intention is not co-running of a household that derives from some need (financial, personal, convenience, etc.), but rather, a full domestic partnership as the natural outcome of two people who choose to join their destinies. Furthermore, the duration of the couple’s cohabitation is irrelevant; the couple’s intention is what matters. It is important to keep in mind that the court will deliberate each case on its merits according to its specific circumstances, analyzing the entire set of facts with the aim of understanding how the couple categorized their relationship. The courts take a flexible approach when ascertaining whether the couple should be deemed in a common law marriage, since the court is cognizant of the fact that no two relationships are alike and each couple’s shared domestic lives have unique characteristics. Have you separated?It is important to know that, when it comes to transferring rights in a shared residential apartment between spouses after they separate, common law couples benefit from the same reliefs as those that apply to a legally married couple. The salient point here is that a transfer of these rights is not deemed a real-estate transaction and therefore, is not subject to tax. Section 55 of the Inheritance Law expressly refers to common law couples and prescribes that the testator is deemed as having bequeathed to the surviving (common-law) spouse whatever the surviving (common-law) spouse would have received as an inheritance by law had they been legally married to each other. Also, the surviving spouse may sue for alimony from the deceased spouse’s estate. Sharing of assets – beyond the rights pursuant to inheritance laws, common law couples are exposed to a situation whereby one of the two attempts to apply the ‘presumption of sharing’ to their relationship when the couple separates, claiming that the assets accumulated during their cohabitation should be deemed the couple’s ‘common property’ for all intents and purposes. The intention here, when referring to “accumulated assets” during the period of their common law marriage, is the real-estate assets, corporate stocks, options and any other property. About two years ago, a judgment was handed down by the Family Court in Haifa, which recognized a woman as the common-law spouse of the deceased for the purposes of section 55 of the Inheritance Law, despite the fact that they had not been living together on a permanent basis and, prima facie, failed to satisfy the second criterion: co-running of a domestic household. The woman succeeded in proving that the couple had regularly maintained family life and that their intention had been to formalize their relations. The court ruled that that the concrete case must be considered after examining the couple’s subjective intention regarding the formalization of their relationship and the steadiness of the relationship and, therefore, the court recognized the woman as the deceased’s common law wife for the purposes of the rights to the inheritance. We clarify that at issue is the ruling of the court of first instance and an appeal has not yet been filed. If you are a common law couple and want to avoid disputes and disagreements that end up in court, we recommend drawing up and signing a non-marital conjugal cohabitation agreement to keep assets separate and to regulate and anchor your rights and obligations as a couple in a common law marriage during the period of your relationship and in the event of a later separation. It is also recommended to have this agreement ratified by a family court. We also recommend that both spouses prepare a last will and testament to regulate the division of each of their estates.
January 17, 2016 / by Dotan Baruch
Shaming on the Internet and Social Networks – the Business Aspect
Shaming on the Internet and Social Networks – the Business Aspect
You have tirelessly invested time, money and significant efforts in order to create a business and to grow it, and you finally see the fruits of your labor and maybe even begin to profit. Yet all of this can disappear with the stroke of a pen (or a tap on the “enter” key). One unsatisfied customer uploads a hostile post about your business to a forum or a social network, and it goes viral and spreads throughout the internet like wildfire. Such a post can cause the near immediate collapse of a business. These posts can include a broad variety of claims - the service/product was deficient, prices are too high, opinions of the business owner are to the right/left of the political spectrum, the business owner promotes liberal/conservative legislation, the business employs someone who was (allegedly) convicted in the past of a crime, etc. Unfortunately what often underlies these claims and this phenomenon (let us call it of business shaming) is competitors seeking to harm their competition. So, how can business shaming be dealt with? What should you do with a harmful post published about your business? It is important to be prepared in advance in order to deal with business shaming - both in a practical and a legal sense. In practical terms it is important to invest the time and effort required to locate the source of the incriminating post before it spreads across the internet, and to thwart it. Once the shaming appears on countless websites, the ability to deal with it practically is nil. Therefore it is crucial that you continuously employ someone to follow and monitor internet websites and social networks in order to locate a shaming post immediately after it is uploaded. Once a shaming post is identified, you must immediately present counter claims or proof to counterbalance the shaming. It is not necessary at this stage to present the entirety of your defense, but rather to present that one point, precisely and briefly, that has the capacity to convince internet or social network users that the shaming has no basis. From a legal aspect, it is possible to engage with the website or social network on which the business shaming was published, and request that they remove the harmful post as soon as possible. You should clarify that you are speaking of a libelous publication (assuming this is the case) and that such post has devastating potential for your business, which could cause significant damages and create a cause of legal action. At the same time, you should attempt to try to locate the author of the harmful content and consider submitting a libel action against him personally. However, it is important to note that currently there is no law that can be used to compel internet service providers and website owners / operators to furnish you the details of the author of such post. The best remedy for business shaming is a quick and decisive response intended to block or prevent the continued spread of the harmful post. A delayed reaction, after the virtual horse has left the stables and is galloping across the internet, will not rectify the damage done. Time is, as always, of the essence.
The year 2015 was characterized by legislative initiatives and interesting rulings relating to the labor market in Israel –employers became obligated to send written notices to job candidates about whether or not they have been accepted for employment, the issue of soccer games on Saturday and more. Here are a few salient points to remember from 2015: Biometric clocks may not be used without consent – the State Attorney General, Mr. Yehuda Weinstein, submitted an opinion in principle to the national labor court, whereby employers desiring to install a biometric (fingerprint) attendance clock should be required to obtain the consent of the employees or of the representative labor union. The opinion also stated that, besides constituting an infringement on employees’ privacy by way of exposing biometric information in general, it also poses a danger that biometric information might be abused or unlawfully used, particularly due to the fact that such information may not be altered, unlike any other electronic means for recording attendance (such as by card or password). Extension order for integrating people with disabilities in the labor market – the order, which was promulgated in October 2014, prescribed that, one year after the promulgation of the validated order, any employer with more than 100 employees is required to ensure that at least 2% of its employees are people with disabilities (this ratio shall be increased to 3% in October 2016). It is important to note that the definition of “people with disabilities” is broad and includes various types of disabilities (physical, mental or cognitive deficiencies, whether permanent or temporary). The committee charged with monitoring the advancement of integration of disabled persons in the labor market issued a directive in October that defined a “person with a disability” as anyone recognized by the National Insurance Institute as having a disability ratio of 40%, or anyone who has been deemed disabled by the rehabilitation committee of one of the authorities (Ministry of Defense, National Insurance Institute), or who has been defined as a disabled IDF soldier. In order to comply with the obligation of fair representation, employers must count the number of people with disabilities who are employed in their businesses. For this purpose, employers may ask all employees to report voluntarily, while explaining that the information is needed in order to comply with the provisions of the extension order. Employees subject to a collective bargaining agreement and to a labor union may file a class action against an employer on the grounds of deprivation of rights - In August 2015, a precedent ruling was handed down by the High Court of Justice that clarified that the Class Actions Law does not prevent the filing of class actions against employers, even if a collective bargaining agreement applies. Up until August, the Class Actions Law prescribed that a class action may not be filed in a workplace operating under a collective bargaining agreement. This exclusion had been based on the assumption that a labor union would adequately represent the interests of all employees and that therefore, it is unwarranted to allow class actions to be filed in such workplaces. This ruling by the High Court of Justice changed the practice of the national labor court of customarily assuming that labor unions adequately protect employees’ rights, making the filing of class actions superfluous. Update to the minimum wage – in the beginning of the year 2015, an update to the Minimum Wage Law was published in the official gazette, which is to apply in four stages. The minimum wage was first updated in April 2015, so that currently, after the first update, the monthly minimum wage is NIS 4,650, while the hourly minimum wage is NIS 25. At the fourth stage, on January 1, 2017, the monthly minimum wage will reach NIS 5,000. It is important for employers to keep track of the dates of the statutory rise in the minimum wage, and to ensure that the pay slips of employees who are earning more than the minimum wage are also updated, as required by law, to reflect the statutory minimum wage in effect on the date of issue of the pay slips. The Obligation to Provide Notifications to Job Candidates - Effective from 2015, potential employers (with some exceptions prescribed by law) require to inform candidates with respect to the screening process which applies to the position applied for within the employer's organization. According to the Amendment an employer will be required to inform a candidate of this process on an on-going basis, as follows: give notice in writing every 2 months to the candidate about the progress of the selection procedure starting from the beginning of the candidate’s screening process and to provide written notice of to the candidate that another person has been appointed to the relevant position no later than 14 days after such appointment. It is important to note that the screening process definition is broad, and includes any interview or test completed by the candidate. Therefore, the new obligations will apply in every case of recruitment and screening procedures, even when it is not a long screening process, including screening tests and involvement of outside institutions. Notice Period where Employee is transferred to another Entity- As part of a decision given this year, the National Labor Court determined that in the case of the transfer of employees from one corporation to another corporation, the first employer has the obligation to give employees an advanced notice period. If the first employer does not give the required notice, the relevant employees are entitled to receive a salary from both employers in respect of the notice period which should have been given.
The Technology, Media & Telecommunications area is changing. We are now seeing new products, new services and innovation at a faster rate than ever before. The Israeli government identifies TMT as one of the most robust areas of the Israeli economy today and it encourages multinational companies to develop their IP within Israel. The government provides tax benefits, funds and grants to companies who develop their IP in Israel, under domestic and international programs, agreements, treaties and collaborations. Programs are directed and funded via the Office of the Chief Scientist (“OCS”). The applicable legislation is the Encouragement of Industrial Research and Development Law. However, there was one aspect of this Law which, in fact, had the effect of discouraging international companies from moving their IP research activities to Israel. The Law restricted the transfer of know-how developed by companies under the program in Israel outside its borders, by setting a redemption fee which was very often undefined, thereby alienating international buyers from a potential investment or M&A. Recent regulatory changes have reformed this contentious issue and it is now legally possible for know-how developed in Israel to be transferred outside of Israel, after receiving the approval of the OCS and the making of the payment of a predetermined transfer fee. Thus, more certainty has been introduced for interested parties. Further reforms were introduced on January 20, 2014, when the Israeli Parliament amended the Patents Act, revising the patent term extension, and in March of 2014, the U.S. Trade Representative's office removed Israel from the agency's watch list for IP violations, which originally had occurred following pressure from the research based international pharmaceutical industry which was competing on the global stage with the local generic drugs based pharmaceutical industry. The “cherry on the cake” in so far as reforms are concerned is that, as of 2014, under Israeli legislation, high-tech companies may pay as little as 9% tax instead of the current 26.5%. This constitutes a very attractive benefit for participating companies. Israel is known to be one of the leaders in the ever-popular and continuously growing 3D printing sector. A new 2015 initiative funded by the OCS aims at using 3D printers designed to print metal components such as titanium for the aerospace industry, dental implants, bone substitutes, and more. This may effectively place Israel at the leadership of a new coming revolution of "self-manufacturing". Legislators will need to quickly adapt to these technological innovations. The major legal issues related to 3D printing not only revolve around intellectual property, but also with safety, product liability and data protection issues.Digital blueprints will most likely be re-created and disseminated in order to print 3D replicas of protected products, or fabricate enhanced creations of existing designs and works of art. Law enforcement will also face new forms of crime involving the use of 3D printing of illegal, regulated or banned products. As for wearable tech, companies which will allow their employees to use such wearables will be faced with issues related to trade secrets, data security and corporate espionage. Strict internal policies and guidelines will need to be put in place.Many companies find themselves having to deal with patent and IP disputes, which of course can be damaging and costly for a company. So, proper planning should precede business activity. It is therefore critical for a company to decide whether to protect its IP with a patent, and if so, where to register the patent. Once it is approved, the patent allows the company to have an advantage in its field of business endeavour.Patent litigation can be very expensive and time consuming. Before filing a patent infringement lawsuit, it is advisable to try to amicably resolve the matter by mediation and reconciliation, no matter where it may be initiated. An experienced, expert lawyer should be retained to represent the aggrieved company. However, if it is not possible to amicably solve the dispute, the company should seek a jurisdiction which is most favourable to it. The jurisdiction is usually determined by the defendant’s domicile, or where the infringement activity takes place, or if the result of the infringement activity will have an effect on a specific territory. As regards Israeli companies, most of the sales and marketing efforts are typically focused in the USA, as would the protection of their IP. In the event of an infringement, it will most likely be litigated in the USA. Sometimes, the infringement may give rise to multi-jurisdictional litigation, thereby requiring claimants to seek favourable judgements capable of being enforced in other jurisdictions.The Israeli telecommunication industry has been a major player in the technology development global arena. WiMAX, VoIP and TDMoIP, are shining examples of Israeli innovation. Currently, the telecom market is rather concentrated and very competitive and opportunities are few. Any new joint venture, acquisition or merger will have to overcome the scrutiny of the Israeli Antitrust Authority and the Ministry of Communication. We should be expecting to see market convergence in the cellular sector with a drop to four operators in the coming years, as well as the continued dominance of the 2 existing TV operators despite the alternatives. As a result of regulatory changes, broadband reform, and intense competition in the market, Israeli companies must seek wider markets abroad. Israeli companies are highly technical, yet they lack international sales distribution channels and marketing capabilities. Successful partnerships with global vendors and service providers lead to better performance, which is the reason why many Israeli companies seek such partnerships outside its borders. Additionally, the rapid digitization of industries has led to the emergence of new telecoms services, such as cloud computing and mobile payment platforms. This has led to a significant change of focus by operators from vertically integrated business models to horizontally integrated business models. The objective is to create value by combining different segments and markets and replicating the features and capabilities of each market to the others. Further, operators will aim to digitize the core of their businesses thereby enhancing customer satisfaction, revenues and cost savings.
A founders’ agreement is the first encounter between entrepreneurs who are embarking on a joint venture to establish a successful start-up company. A founders’ agreement reflects the relationship between the entrepreneurs inter se and between each of them and the joint venture.The importance of this agreement should not be underestimated. This comprehensive agreement, which is tailored to the nature, needs and aspirations of each of the entrepreneurs, and particularly those of the new venture, provides a strong foundation for a healthy and successful company.Frequently, the drafting of a founders’ agreement requires the parties to address topics that many founders fail to address, either due to a lack of experience, a desire to avoid friction, or simply because they are looking at the venture through rose-colored glasses. Meticulous, professional handling of these issues will provide creative solutions which, with the mutual agreement and commitment of the parties, will help navigate the venture along the optimal route to success.Barnea & Co. provides, inter alia, valuable assistance to entrepreneurs and start-up ventures and works with them to draft a founders’ agreement that prepares fertile ground from which the venture can grow and prosper. Micky Barnea is an expert in advising start-up entrepreneurs – watch Micky lecturing on the important issue of Founders’ Agreements:
December 7, 2015 / by
Gambling via Mobile Device – Constraints and Opportunities
Gambling via Mobile Device – Constraints and Opportunities
The online gambling industry generates billions of dollars annually and is one of the burgeoning industries on the internet today. The growth of this industry spurred online gambling operators to search for additional operating channels, besides PCs and laptops, such as applications customized for mobile phones and handheld devices that may be used on membership-based websites (such as online casinos).Thus, the mobile channel is becoming a primary channel in the online gambling industry.Considering the heightened use of mobile phones in general, online gambling operators are also seeking to offer their products via this channel – similarly to any other electronic commerce.Additionally, the opportunity being given to online gamblers to continue gambling when they shift from their PC platform to their mobile phone platform while using that same operator and a single electronic wallet (which is synchronized with the operator’s internet version and mobile version), increases customer loyalty to a particular gambling operator and to its brand.Furthermore, the expansion of access to gambling products also via the mobile channel lures customers to spend more time gambling, thus enabling online gambling operators to generate revenues from customers at a faster pace (than prior to the advent of the mobile application) and increases the “value” of these customers and the revenues generated from them.A similar channel exists in handheld devices, which enable customers who are visiting real casinos to continue gambling during their stay at the casino, even when they are outside of the casino halls, but still on the grounds of the casino complex (such as in the casino’s hotel rooms and public spaces, for example, at the pool, in one of the restaurants, etc.). This possibility, which is available in some casinos in the United States, also offers casinos potential growth in revenues and profits by providing access to gambling outside of the actual casino halls, while avoiding regulatory constraints and capital expenditures on physical expansions of their casino halls.That being the case, the use of the mobile channel undoubtedly offers significant potential for the online gambling industry. However, concurrently, this channel also poses significant constraints, mainly in terms of regulations.Firstly, the fact that this is a virtual channel raises the question of the law and regulatory regime applicable to online gambling via the mobile channel – whether the particular regime permits or prohibits online gambling. For example, let us assume that a Spanish citizen and resident, who has a gambling account with a Spanish licensed gambling operator, wants to use the said operator’s mobile application while he is staying in Holland. Will Spanish law, Dutch law or some other law apply in this case? Prima facie, the Spanish customer is “carrying” his gambling account with the Spanish operator in his mobile device, but, on the other hand, he is seeking to gamble while he is in Holland (which bans online gambling), using the Dutch communications network.These issues also exist generally in the general online gambling industry, but the mobile channels highlight the salience of the aforesaid regulatory issue, mainly because it has become a far more widespread issue. The more extensive the use of mobile channels in the online gambling industry, the closer the world gets to the point where it will become essential to find a satisfactory solution to this issue.Furthermore, the expansion of the online gambling industry into mobile channels could serve as ammunition for the most ardent opponents of this industry. One of the strongest arguments being made in the battle against online gambling is that the evolution of this industry will turn every computer into a casino in a way that substantially facilitates access to gambling, since mobile phones are ubiquitous among the general population. – and thus serves to promote an inconceivable increase in gambling addicts (one extreme scenario that is repeatedly mentioned is that of teenagers – who, as minors, are banned from entering physical casinos – who become rampant secret gamblers via online gambling websites up in their attics). Considering the incessant battle between the opponents to the online gambling industry due to the inherent phenomena involved (or at the very least, due to the phenomena that online gambling opponents claim are inherent in this industry) and proponents of online gambling, who are seeking to regulate the industry through legislation, any development, even merely of a technological nature, could impact the regulatory regime that will eventually be instituted. Even in the United States, where gambling is firmly established, there is a persistent battle at the federal level over whether or not all kinds of online gambling should be prohibited by law. Considering the Republicans’ control over the U.S. Congress, and the support of legislation banning online gambling by the casino magnate, Sheldon Adelson, one cannot rule out the possibility that the expansion of the online gambling industry to mobile channels might, in the final analysis, be the last straw that leads to its downfall.
Q: You work extensively with companies operating in the online gaming sector – what are the legal and regulatory challenges faced by firms operating in this sphere?A: The main legal and regulatory challenges which face online gambling operators is the worldwide shift from what is known as the .com situation to the .country environment. This relates mainly to the changes facing online gambling operators that are required, due to legislative changes, to obtain online gambling licenses in numerous jurisdictions across the world in order to continue their operation in those jurisdictions. Such jurisdictions include, by way of example only, the UK, Spain, Italy, Denmark and Belgium. The most recent and substantial change has occurred in the UK where online gambling operators that wish to provide their products and services in this jurisdiction will be required to obtain an online gambling license from the local Gambling Commission.Online gambling operators can now be subject to regulatory regimes maintained by several gambling regulators, each one of them with different sets of requirements – in connection with the license application, but mainly with the ongoing operation, relating to issues such as player protection, responsible gambling, software testing etc. All of the above requires the online gambling operators to allocate substantial personnel, time and allocation of funds.Adding to that is the fact that usually, with the obtaining of local online gambling license, the tax man cometh; that is, the online gambling operators, that have (or at least most of them) became accustomed to a very low tax liability in their home jurisdictions, are now required to pay substantial taxes to the jurisdiction from which they have obtained an online gambling license. Such taxes have the risk of turning their online gambling activities in that jurisdiction to unprofitable, which, in turn, could lead such online gambling operators to forfeit their licenses and exit these markets. Q: What role does regulation play for online gaming companies operating across multiple jurisdictions? What do you recommend to companies to be aware of?A: Online gambling operators should be aware of the fact that, in the long run, it will become very difficult for them to operate in a jurisdiction with an online gambling licensing regime, without obtaining a license from the local regulator. The reasons for this conclusion include, inter alia, the preference of local customers to wager via a locally licensed operator, the difficulties and costs associated with operating without a license (e.g., higher fees and commissions paid to third party intermediaries such as payment processors and affiliates), the increased enforcement activities taken by the local regulators and the understanding that an operation without a local license carries with it a lower value to its owners / shareholders – compared to a similar operation with a local license.It follows that the online gambling operators must get accustomed to a situation in which, in respect of a jurisdiction that offers an online gambling licensing regime, they need to decide whether to apply for a license or exit the relevant market. Q: How are most companies structured in the online gaming sector? What are the problems for companies wishing to set up tax efficient structures?A: Setting up a structure that is tax and regulatory efficient, which can provide value to the owners / shareholders, depends on the specific facts of each case including, by way of example, the main target jurisdictions, the offering of products and services in grey markets, adherence to incorporation requirements of licensing jurisdictions, what licenses are obtained, payment processing etc. Due to the numerous issues and considerations to be taken into account as well as the intricacies of the regulatory and tax considerations, it is vital that the structuring will be handled together with legal and tax counsels. Q: Why to operate out of Israel?A: Israel is considered a major power house in the online gambling industry, on the basis of, inter alia, the tech savvy Israelis that provide online gambling operators with state of the art software development and marketing strategies. This has led several online gambling operators to set up shop in Israel (although most of them avoid placing their main operational units in Israel for the reasons described in 5 below). Q: What are the legal implications if online gaming and e-commerce companies do not comply with government regulator in Israel?A: In Israel, there is no liberal licensing regime for online gambling activities. Only the sports betting monopoly is authorized to offer online sports betting and horserace wagering, and any other online gambling activity is not licensable in Israel. The current stance of the Israeli authorities is that given this legal situation, any online gambling offering made available to Israelis, even if provided from outside of Israel and on the basis of a foreign regulatory license, is illegal; as such, the Israeli authorities take quite a harsh position in respect of such activities and use a multitude of enforcement activities, such as financial payment blocking, ISP blocking (although this attempt was struck down by the Israeli Supreme Court due to lack of clear legal authority), arrests, seizing of funds and equipment, indictments etc. For the objective of combating online gambling, a special task force was created; such task force includes the Police, the Ministry of Justice, the Anti-Money Laundering Authority, the Central Bank and the Tax Authority.
Employee rights in Israel are regulated by a long list of laws, extension orders and collective bargaining agreements. The perception of labor law is that it is primarily protective of employees vis-à-vis employers, and indeed, a basic rule of law states that employee contracts cannot derogate from rights prescribed in laws, extension orders and collective bargaining agreements, but may only supplement them. In light of this stance and this rule of law, the importance of employee contracts has steadily diminished over the years and today, the sentiment among many employers is that an employee contract is not really meaningful and is merely a declarative document that employers should retain for the sake of good order. Many employers do not make employees customarily sign employment contracts at all, while others make use of an old outdated version of a contract. In fact, contrary to this attitude, an employment contract is exceedingly meaningful and important, if it is drawn up correctly. Employment contracts help employers comply with their statutory obligationsThe Notices to Employees and to Candidates for Employment Law (Employment Terms and Screening and Hiring Procedures) was enacted in 2002, which obliges every employer to issue written notice to every employee, specifying his or her principal employment terms, but does not require the employee to sign the notice, nor does it require the inclusion of the employee’s obligations. The law defines a list of compulsory details for inclusion in the notice or, alternatively, in the employment contract that constitutes a substitute for this notice. If an employer fails to issue a notice or issues a notice that fails to comply with the law, this constitutes a violation of the law, for which the employer can expect fines and the employee can also sue for compensation as a result. In this instance, a correctly drafted employment contract can help employers comply with their statutory obligations, by including in the contract all of the details required by law, as well as the employee’s warrants and covenants that are not included in the statutory notice.There are additional contract clauses that an employer can include in the contract in order to minimize its exposure, such as overtime clauses or clauses addressing deductions of an employee’s wage due to various debts (such as if an employee’s use of gasoline, telephone, etc., exceeds the defined limit).Employment contracts can be helpful in overcoming statutory restrictions. For example: employers are prohibited from requesting medical information from employees, due to the privacy protection law; however, a clause may be incorporated in the employment contracts in which the employees must warrant that there is no medical reason why they cannot perform their jobs according to the job description. Another example: employers are prohibited from demanding a ‘police certificate of no criminal record’; however, employment contracts enable employers to obtain warrants from their employees that they have not been convicted of particular offenses that relate to the positions for which they are candidates. Another example is the non-competition clause that many employers want to include in employment contracts. It is important to note that, even though the labor courts will not always enforce such a stipulation, if such a stipulation is not included in the employment contract, then the employer cannot file a motion to the labor court that relates to non-competition on the part of an employee. Another topic associated with competition is the issue of intellectual property, a topic that must be regulated in employment contracts, in clauses that define the proprietary rights to the intellectual property, that assure employees’ future cooperation and that regulate the matter of the consideration in respect of the intellectual property, etc. Employment contracts expressly regulate contractual rightsApart from the fact that employee contracts help employers comply with the statutory requirements, there are many employment rights that are purely contractual rights and are not anchored in laws, and therefore, the employment contract is the only possible instrument for regulating them. Therefore, the more explicit and detailed the employment contract is, the fewer are the uncertainties and the chances that disputes will arise over interpretation of these rights by the labor court. Examples of contractual rights not prescribed by law are bonuses, sales commissions, options, company car, telephone, etc. Commissions and bonuses are good examples of rights that labor courts are often petitioned to interpret as a result of the ambiguity of the arrangement or because they were not adequately defined in a contract. Consequently, it is important to regulate these rights clearly and unequivocally in an employment contract, including the eligibility criteria, the calculation methodology, the examination date, the payment date, etc. In Gimelstein vs. Yazamco Ltd., the national labor court (appellate level) was petitioned to deliberate a sales representative’s various bonuses (target-based bonuses and a profitability-based bonus), who also received sales commissions within the scope of his employment contract, and to rule whether or not they constituted a component of his wage. Employment contracts help to assimilate procedures and policiesEmployment contracts are also ideal tools for employers to define and assimilate procedures and policies on various issues, such as safety, the prevention of sexual harassment, attendance reports, protection of privacy, etc. Employment contracts constitute a convenient instrument for informing employees of the various work procedures without having to produce a thick procedure manual. This will not only add clarity to the work relations, but may also help employers to defend themselves during various legal proceedings, when the employer must prove that it took appropriate action to assimilate policies and took appropriate preventative measures. A prime example of this may be found in the ruling of the national labor court on the matter of an employer’s right to read its employees’ e-mail correspondence: in the Tali Iskof case, the national labor court ruled that in order for an employer to not be deemed as having infringed on its employees’ privacy, the employer must show that it had set a clear policy about the use of e-mails and had informed its employees about this policy. Employment contracts help to reduce employment costsBeyond the importance of an employment contract in terms of managing risks or minimizing legal exposures, it also constitutes an instrument for defining various arrangements that help regulate the cost of a position and reduce employment costs. Some arrangements can reduce the employment cost, provided that they have been expressly and accurately defined in the employment contract drafted by a professional. For example, the arrangement pursuant to Section 14 of the Severance Pay Law, whereby an employer will be exempt from paying supplementary severance pay in the event of a dismissal, will only be valid if it has been correctly worded and incorporated in the employment contract. A bonus will not be considered a wage component only if the bonus plan has been correctly structured, is defined as meritorious and as not constituting a guaranteed wage component. On the other hand, there are components that may be included in the wage, if they have been expressly defined as such in the employment contract, as was the ruling in the Orient Color Photography Industries (1986) Ltd. case on the matter of convalescence pay, travel expenses and holiday pay.In summation, employers benefit from recognizing the importance of employment contracts and their contribution to both the legal aspects of employment relations, and to their labor relations in general, since they provide both parties with certainty and clarity. Employment contracts help employers to assimilate policies and procedures, to enhance their image and reputation, to reduce employment costs without adversely affecting motivation, and also help employers to minimize exposures to civil suits lodged by their employees, as well as exposures to enforcement proceedings by the Ministry of Labor relating to criminal and administrative matters, including in relation to the liability of managers who might be found personally liable for offenses committed by the employer's corporation.