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Blog
Proper Articles of Association – Now More Than Ever
March 2, 2021
/ by
Yuval Lazi
,
Amichay Tessler
The coronavirus crisis, which hit both the Israeli market and markets globally, has been unsettling. It undermined existing collaborations and encouraged the creation of new ones. It weakened the inertia that drove many businesses and employees, and forced numerous entities to reinvent themselves, to initiate and to dare. To make the entrepreneurial dream a reality, many people prefer to cooperate with other entities in order to increase a new business's prospects of success. This is particularly true during the uncertainty of the coronavirus era and the string of lockdowns imposed on Israelis. A Company's Most Important Document – Articles of Association A common method of incorporation and working together toward a shared business goal is establishing a private company. In a company, the entrepreneurs become shareholders. Before embarking on this road and establishing a company, it is important to note an important, constitutive document designed to define future relationships between shareholders. This is a company's articles of association. A company's articles of association is in effect a contract between the shareholders themselves and between them and the company, which is an independent and separate entity. In the articles of association, the shareholders regulate many activities in a manner that binds them. As opposed to shareholders’ agreements, which only apply to the specific shareholders that are party to them, the articles of association apply to all the company's shareholders, including those who join the company in the future. Courts have even held that the articles of association override any other arrangement between shareholders, to the extent such arrangements are inconsistent with the articles of association. Arrangements Included in the Articles of Association Shareholders define the structure of the company's board of directors, as well as which decisions require a special majority of shareholders or directors (e.g., unanimously). These special majority decisions may include investments or expenses that exceed a certain sum, appointments of managers, entering new field of activity, etc. Additionally, shareholders may provide for mechanisms to protect against the entry of new shareholders. Such mechanisms are designed to preserve the company's DNA and give shareholders the tools to correct a situation in which shareholders who do not share their agenda or vision at the founding of the company later join it. For instance, the shareholders may decide to grant a right of first refusal to the existing shareholders (some or all of them). The implication is that when a shareholder wishes to sell his shares, he must offer his shares for purchase to the shareholders with the right of first refusal before offering them to a third party. Rights Attached to Shares A company's articles of association are critically important, especially when there are disputes between shareholders. When this happens, each party clings to an interpretation of the vaguer provisions most convenient to him, in order to take a bite out of the opposing party's rights. Last October, the court held that articles of association must be interpreted strictly (Ariela Vivian Shaked v. Wave Guard Technologies Ltd.). This ruling even further cements the importance of recording the parties' agreements and regulating the rights and protections to which each party is entitled. It is so much so that these agreements may be the material factor in resolving disputes and battles for control between shareholders. Consequently, we anticipate many companies to incorporate in the coming weeks and months. Drafting proper articles of association, which constitutes a binding agreement between the shareholders and defines their rights and the operation of the company, is crucial. It will help clarify understandings between the shareholders, prevent future disputes and misunderstandings, and avoid obstacles on the road to the business's and the company's success. *** Contact us if you require any assistance or further information.
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SPAC: A Dream Worth Half a Billion Shekels
February 21, 2021
/ by
Zvi Gabbay
,
Hagit Ross
In recent months, the IPO market has reached a boil. It seems anyone with any kind of business is dreaming about joining the Israeli stock market. Lets look at the figures. From 2008 (the outbreak of the subprime crisis) through 2019, 76 new companies entered the Israeli stock market through an IPO process (an average of approximately 6.33 companies per year). In 2020 alone, 27 new companies entered the Israeli stock market, and in January 2021, seven new companies entered the Israeli stock market*.
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Ministry of Justice: State Must Create a Temporary Framework for Insolvency Procedures in Light of COVID-19
February 11, 2021
/ by
Michael Dubin
,
Liron Dahan
The coronavirus pandemic has wreaked extensive economic havoc on the activities of many businesses and households in Israel. According to data from the Commissioner of Insolvency Proceedings, 2020 brought a rise of about 41% in the number of applications to commence insolvency proceedings compared to 2019.
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Can You Really Find a Sample Founders’ Agreement on the Web?
January 28, 2021
/ by
Yuval Lazi
Sample founders’ agreements are available online for download by anyone. Though there are numerous accessible founders’ agreements, a document downloaded from the web is not one you should rely on when establishing your new venture.
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Collecting Employee Information? It’s Time to Wake Up
January 12, 2021
/ by
Karin Kashi
Employers collect data about their employees. It starts with employees’ salary data, resumes, and work hours. It continues with fingerprints and images from security cameras, followed by employee meals and business trip information. Employers also collect medical information, personal messages on company phones, and location data of the company car for private trips. It goes on and on and on.
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The Importance of Contracts in Israel
December 20, 2020
/ by
Dor Marinovsky
Law has a major role in Israeli business. Israelis feel their freedom to act is determined by what is allowed under law, and this includes what has been agreed to in a binding agreement. Therefore, legal contracts form the basis of the Israel business environment. The existence or absence of a binding agreement are the first question Israelis would consider. If a legal agreement has been entered into, Israelis would feel obliged to respect it. If however, the discussions have not been concluded in an agreement, most Israelis would feel they are not yet obliged to proceed with the other party. This is a strong contributor to the creation of certainty when doing business in Israel.
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A Do and Don’t Guide before Purchasing Rights in Agricultural Land in Israel
December 2, 2020
/ by
Hagit Ben Moshe
The Israeli public is offered a number of opportunities to acquire rights in agricultural land that may be rezoned to residential. Before purchasing such rights, there are a number of issues to examine in order to understand the land’s potential.
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Acquiring an Israeli Company – Becoming an Israeli Employer
November 18, 2020
/ by
Netta Bromberg
Israel has become an attractive destination for businesses, whether opening operations in Israel or acquiring existing operations. The Israeli market includes cutting-edge research and development and access to some of the leading talents in a range of industries. Many international entities have development centers in Israel (among the many are Intel, Microsoft, Google and SONY).
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COVID-19, From Crisis to Opportunity
November 2, 2020
/ by
Zvi Gabbay
,
Avishag Salomon
Crises test our resilience. They prevent us from deceiving ourselves about things that are unpleasant to face. Therefore, the COVID-19 crisis is a real opportunity to upgrade an organization’s compliance mechanisms and the status of its compliance officer. This includes not only improving compliance capabilities, but also integrating and deepening connections to the organization’s management.
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Decentralized Finance (DeFi) –The Future of Finance?
October 15, 2020
/ by
Andrey Yanai
What is DeFi? The first cryptocurrency, Bitcoin, is still the most well-known application of blockchain. However, this technology has since rapidly evolved and expanded in many other areas. The initial hope with Bitcoin was to make both money and payments decentralized and universally accessible. Although Bitcoin failed to live up to this promise, decentralized finance based on blockchain (“DeFi“), also called open finance, is a fledgling technology with potential. DeFi is operated by decentralized, permisionless (without any central authority) applications, called DApps, built on a blockchain network, most commonly Etherum. Visionaries see this as an open-source alternative to every financial service we use today: from savings, loans, and trades, to insurance and even more, all globally accessible.
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