Dual-Listed Companies: Updated Information
The Israel Securities Authority has published a position paper summarizing updated information about the processes for listing and delisting dual-listed companies on the Tel Aviv Stock Exchange and additional stock exchanges abroad. The information involves the process of issuing securities and the reporting format thereof.
The position paper provides information both to dual-listed companies and companies considering dual listing.
Following is a summary of the key topics addressed in the position paper:
Listing of a dual-listed company: A company whose securities are listed for trading on one of the foreign stock exchanges included in the list specified in the Israel Securities Law, 5728 – 1968, and that is seeking to enter into a dual-listing arrangement, is required to submit a registration document to the Israel Securities Authority (ISA) and to the Tel Aviv Stock Exchange (TASE) in the Hebrew language and to list on the TASE the same security that is traded on the foreign stock exchange. In case of a foreign corporation (as opposed to a corporation registered in Israel), it must also attach to the registration document a listing permit application addressed to ISA staff.
The companies law regime that applied to the company prior to the dual-listing will continue to apply, i.e. an Israeli company will be subject to the Israeli companies law regime, while a foreign company will be subject to the companies law regime relevant to its state of registration. In terms of reporting, the rules of the foreign stock exchange will apply to the dual-listed company. However, a foreign dual-listed company is required to include an undertaking in the registration document stating that, if its securities are delisted from the foreign stock exchange but continue to be traded only on the TASE, then it will be subject to the Israeli companies law regime.
Issuance process of a dual-listed company: While a listing of securities traded on a foreign stock exchange for trading on the TASE requires only the filing of a registration document, a similar exemption is not applied for an offering of securities to the public in Israel. Rather, for an offering of securities, it is mandatory to publish a prospectus in Israel (Until now, such issues were possible only for bonds and preferred stock, provided that the ordinary shares of the dual-listed company were listed both on the TASE and on the foreign stock exchange.) However, the ISA has the power to exempt a dual-listed company from provisions relating to the structure, format, and details of the prospectus, so that the dual-listed company will actually be able to rely on the prospectus filed with the foreign stock exchange. Furthermore, subject to the fulfillment of particular conditions, a dual-listed company may publish a shelf prospectus in Israel and issue securities to the public in Israel by virtue thereof through shelf offering report. Notwithstanding the forgoing regarding the companies law regime applying to a foreign corporation, in a prospectus for a bond issue, a foreign dual-listed company is required to include an undertaking by the company and its controlling shareholders and officers that they will not object to the imposition of Israeli law in proceedings relating to a compromise settlement, an arrangement, or insolvency, including in relation to such proceedings being conducted in Israel.
Disclosure obligations of dual-listed companies: Since the dual-listing arrangement is designed, first and foremost, to encourage companies traded on foreign stock exchanges to also register for trading on the TASE, dual-listed companies are generally not subject to additional disclosure obligations beyond those applying to them pursuant to the foreign stock exchange regulations. There are certain exceptions whereby a company may be required to issue an additional specific disclosure in Israel. These include instances in which a foreign corporation (as opposed to an Israeli corporation) or a dual-listed company intends to issue a security in Israel that is not traded on the foreign stock exchange.
Delisting: A dual-listed company seeking to delist its securities from the TASE will be required to file a report of this intention three months prior to its requested delisting date, provided that it has verified that holders of the securities traded under dual listing will not encounter any technical or material obstacle to trading their securities on the foreign stock exchange immediately after the delisting. Notwithstanding the forgoing, a dual-listed company that issued bonds traded only in Israel and that wants to delist its dual-listed shares from the TASE will become a “reporting corporation”, and thus subject to the applicable reporting obligations. On the other hand, since the TASE regulations prohibit trading of preferred stock without trading of ordinary shares, a dual-listed company that issued preferred stock in Israel only will not be able to delist its ordinary shares from trading on the TASE without listing the preferred stock for trading on the foreign stock exchange. A dual-listed company whose securities were delisted from a foreign stock exchange will become subject to the Israeli Securities Law as any other reporting corporation whose securities are traded solely on the TASE. However, such a company will be allowed to continue reporting according to the foreign disclosure rules for six months after the securities were delisted from the foreign stock exchange. This concession does not apply to ongoing immediate reports, which with respect to same, the reporting obligation shall apply immediately upon delisting of the securities from trading on the foreign stock exchange.
Changing from a reporting corporation to a dual-listed company: A dual-listed company whose securities are listed for trading on certain foreign stock exchanges will be able to switch to an ongoing reporting format in Israel within the framework of dual listing, subject to receipt of approval of a majority of the holders of its securities (excluding the controlling shareholders) participating in the vote. In this regard, a dual-listed company must convene class meetings, differentiating between holders of the various classes of securities being traded on the TASE and holders of the various classes of securities being traded on the foreign stock exchange.