Expression of Opinion in Regard to Organizing

Published in Hebrew:

בג”צ פלאפון –  הבעת דעה מצד המעסיק לעניין הליכי התארגנות ראשוניים:

 בחודש ינואר 2013 ניתן פסק דינו של בית הדין הארצי לעבודה, אשר קבע איסור על המעסיק להתערב ולהביע את דעתו כנגד הליכי התארגנות ראשוניים של עובדים בארגון, עת קבע בית הדין הארצי כי ישנה חשיבות גבוהה בהגנה על זכות העובדים להתארגנות ובפרט זו התארגנות ראשונית.

בפסק דינו של בית הדין הארצי נקבע כי המעסיק לא יתערב בהליכי ההתארגנות הראשוניים, לא יקים “ועד מטעם”, לא יביע עמדה בתחרות בין שני ארגוני מעסיקים לעניין היציגות של אחד הארגונים, לא יחתים עובדים על איסור התארגנות בכל צורה ולא ייתן הטבות לעובד כנגד התחייבותם שלא להתארגן בארגון יציג וכן כללים נוספים.

העתירה לבג”צ הוגשה ע”י לשכת התיאום של הארגונים הכלכליים, בעיקר כנגד קביעתו של בית הדין הארצי לפיה אסור למעסיק להתערב ולהביע דעתו בהליכי ההתארגנות. המעסיקים טענו כי קביעה זו עולה עד כדי פגיעה בחופש הביטוי של מעסיקים ואף כדי פגיעה בקניינו של המעסיק.

בג”צ בפסק דינו הותיר את פסיקת בית הדין הארצי לעבודה על כנה, בין היתר לאור מדיניות צמצום ההתערבות של בג”צ בפסיקת בית הארצי לעבודה.

עם זאת, ביחס לסוגיות העולות מפסק דינו של בית הדין הארצי קבע בג”צ כי למול החזקה לעניין כוחו העודף של המעסיק ביחסי העבודה, הרי שהתארגנות עובדים יוצרת איזון מסוים ביחסי הכוחות. לאור זאת ישנה חשיבות מיוחדת להגנה על זכות ההתארגנות הראשונית של העובדים, אשר כוחו העודף של המעסיק יוצרים פוטנציאל להשפעה לא ראויה לקראת התארגנות מקצועית.

יכולת השפעה זו מחד, והרצון של בית הדין לעבודה להגן על התארגנויות ראשוניות, הוא שהוביל ליצירת החזקה לפיה הבעת דעה מצד המעסיק מהווה לחץ והשפעה בלתי הוגנים על העובדים, הפוגעים בזכותם להתארגן.

עם זאת, בכפוף לחיזוק דברים אלו, הזכיר בג”צ כי כללים אלו הינם כללים ראשוניים, אשר צפויים להשתנות בעתיד, בהתאם להתפתחות הפסיקה והמקרים שיבואו בפני בתי הדין לעבודה ואיזון הכוחות בין ארגוני העובדים והמעסיקים, בדומה למערכת הכללים שהוצגה על ידי היועץ המשפטי לממשלה בפני בג”צ, אשר נועדו לאיזון החזקה שנקבעה על ידי בית הדין הארצי לעניין מאזן הכוחות ואיסור התערבות המעסיק או מי מטעמו בהליכי התארגנות ראשוניים.

לסיכום, אף שבג”צ הותיר את פסק הדין של בית הדין הארצי וקביעותיו על כנו, הרי שנרמז על ידו כי יהיה צורך בפיתוח של הפסיקה, וכי פסק דינו של בית הדין הארצי אינו סוף פסוק ביחס לשאלת התערבות המעסיק בהליכי התארגנות ראשונית, ובמקרים מסוימים ייתכן ויותר למעסיק להתערב, אולם יהיה עליו לעשות זאת בתום לב, וככל הניתן בשיתוף עם ארגון העובדים.

Employment During War (Hebrew)

Published in Hebrew:

יחסי עבודה במצב הביטחוני הנוכחי

 ברצוננו להביא בפניכם מספר סוגיות העולות ביחסי העבודה בעקבות המצב הביטחוני הנוכחי:

המצב הביטחוני הנוכחי, בדומה למבצעים צבאיים קודמים, מציבים בפני המעסיקים והעובדים סוגיות שונות, ביחס לתשלום לעובדים בגין תקופה זו.

יובהר, כחלק מהתפיסה של מדינת ישראל, לפיה המצב הביטחוני שמקשה על אזרחים להגיע לעבודתם הינו מצב אשר נמשך מאז יום הקמתה, הרי שהפעילות הכלכלית נמשכת ככל הניתן. עם זאת, עובדים רבים בוחרים שלא להתייצב לעבודתם.

תחילה יודגש כי האמור להלן אינו חל על מי שעובד במפעלים חיוניים, שהינם בין היתר עובדי רשויות מקומיות, רשויות מקומיות, משרדי ממשלה, שירותי חירום, בתי חולים, בתי זיקוק, תחנות כוח, מתקני התפלה, תעשייה ביטחונית, מפעלים בענף המזון, חנויות מכולת שכונתיות, בתי מרקחת, נמלים, תחבורה ציבורית ועוד. ככל שעובדים אלו נעדרים מעבודתם, הרי שהדבר אף מהווה עבירה פלילית.

תשלום לעובדים הנעדרים מעבודתם:

פרט לעובדים אלו, למעט אם ניתנה הוראה מפורשת ע”י פיקוד העורף שלא להתייצב לעבודה, ונכון לכתיבת שורות אלו טרם ניתנה הוראה כאמור, אזי אין מגבלה על המשך עבודה סדיר. במצב דברים זה, היעדרות של עובד מעבודתו תהיה על חשבונו בלבד, ותופחת מימי עבודתו / מכסת ימי החופשה.

נבהיר כי באירועים ביטחוניים קודמים, כדוגמת מלחמת לבנון השנייה, מבצע עופרת יצוקה מבצע עמוד ענן ועוד, נקבע בדיעבד פיצוי לעובדים, בתנאים.

כך למשל, נקבע כי לגבי עובד שנעדר מעבודתו, לצורך השגחה על ילדו בשל סגירת מוסד הלימודים של הילד, בחודש מרץ 2012, ישופה המעסיק עד סך של 280 ₪ לכל יום עבודה ששילם לעובדו בעד היעדרותו של העובד.

כך עוד, לאחר מבצע עמוד ענן נחתם הסכם קיבוצי שהורחב בצו הרחבה על כלל העובדים ב”אזור” כהגדרתו בהוראת שעה בתקנות מס רכוש, לפיו יהיו זכאים העובדים בהתאם לתנאי הצו לתשלום חרף העובדה שנעדרו מעבודתם, בעוד המעסיק יהיה זכאי לשיפוי מאת מס רכוש.

נכון למועד כתיבת שורות אלו טרם ניתנו הוראות ביחס לסבב ההסלמה הנוכחי, ומייד לכשיינתנו נעדכן אתכם.

איסור פיטורי עובדים במילואים:

אנו מזכירים כי חל איסור לפטר עובדים שגויסו למילואים, במיוחד ככל שמדובר בעובד שגויס בגיוס חירום (“צו 8”).

איסור זה תקף גם 30 ימים לאחר המילואים.

איסור פיטורי עובדים בהתאם להוראות פיקוד העורף:

חוק הגנה על עובדים בשעת חירום, התשס”ו – 2006 מתייחס לשני מצבים:

א.         אם נאסר על ידי פיקוד העורף להגיע לעבודה – חל איסור לפטר את העובד. עניין זה תקף ככל שמקום העבודה אינו ממוגן, ופיקוד העורף אסר על הגעה למקומות שאינם ממוגנים. אנו מניחים שאיסור זה יחול על כל מקום עבודה לא ממוגן ומסוכן.

ב.         בנוסף, ככל שנקבע על ידי פיקוד העורף על סגירת המוסד החינוכי שבו לומד ילדו של העובד שטרם מלאו לו 14 או שהוא בעל צרכים מיוחדים, אזי חל איסור לפטר את העובד, ובתנאי שבן זוגו (ככל שישנו) עובד שכיר ו/או עצמאי וכן התייצב לעבודתו, ובתנאי ובמקום העבודה של העובד לא קיים סידור נאות להשגחה על הילדים.

הפרת איסורי הפיטורים לעיל הינם עבירות פליליות הנושאות קנסות, הן על המעסיק והן על נושאי משרה בחברה.

אנו מקווים שהשקט ישוב אלינו במהרה, ונשוב לעסוק בנושאים שוטפים.

Banking Legal Update (Hebrew)

Published July 2014:
תיקונים לנוהל בנקאי תקין 312 “עסקי התאגיד הבנקאי עם אנשים קשורים”
המפקח על הבנקים פרסם תיקונים לנוהל בנקאי תקין 312 העוסק בעסקי התאגיד הבנקאי עם אנשים קשורים

· ביום 10 ביולי 2014 פורסם חוזר מטעם הפיקוח על הבנקים בדבר תיקון לנוהל הבנקאי התקין (נב”ת 312) המסדיר את עסקי התאגיד הבנקאי עם אנשים קשורים.

· במסגרת התיקון, הורחבה תחולת ההגבלות על חבויות אנשים קשורים, בין השאר באמצעות:

o הרחבת הגדרת המושג “איש קשור” על ידי הורדת הסף הנדרש להחזקה באמצעי שליטה בתאגיד בנקאי (מ- 10% ל- 5%).

o הגדרת מי שמחזיק באמצעי שליטה בתאגיד בשליטת התאגיד הבנקאי כ”איש קשור”.

· התווספה דרישה מפורשת להתוויית מדיניות, תהליכים ואמצעי בקרה ודיווח לעניין אישור עסקאות עם אנשים קשורים.

· עודכנו הסכומים בגינם נדרש לאשר עסקה עם איש קשור בועדות הדירקטוריון המתאימות.

· חודד האיסור על התקשרות בעסקה עם איש קשור החורגת מהמקובל בתאגיד הבנקאי.

· התיקון ייכנסו לתוקף ב- 1 בינואר 2015.

· מזכר זה סוקר בתמציתיות את החידושים העיקריים בתיקון.

· תשומת הלב, כי הגם שהנוהל מחייב לכאורה תאגידים בנקאיים בלבד, יכולה להיות לו השלכה רחבה על גופים שונים, הנמצאים בקשרים עסקיים עם בנקים ובמיוחד בכל הקשור לקבלת אשראי.

כללי

נוהל בנקאי תקין מס’ 312 “עסקי תאגיד בנקאי עם אנשים קשורים” (להלן: “נב”ת 312”) מגביל את היקף החבויות (כגון מתן אשראי וערבויות) של אנשים קשורים לתאגיד בנקאי. ככלל, החבות הכוללת של אנשים קשורים לתאגיד בנקאי אינה אמורה לעלות על 10% מהון הרגולטורי1 של התאגיד, בכפוף לחריגים מסוימים. כמו כן, הנוהל קובע הוראות בנוגע לעסקאות מסוימות בין תאגיד בנקאי לבין אנשים קשורים, שמטרתן לוודא כי אלו ייעשו בתנאים שאינם חורגים מתנאי השוק ולפי שיקולים עסקיים גרידא. באופן עקרוני, עסקאות בין התאגיד הבנקאי לאנשים קשורים העולות על סכומים מסוימים, טעונות אישור ועדה מיוחדת של הדירקטוריון לעסקאות עם אנשים קשורים (בחלק מהבנקים, מדובר בועדת הביקורת). להלן ייסקרו עיקרי התיקונים בנב”ת 312.

1. הרחבת הגדרת המונח “איש ‘קשור” והמגבלות על חבויות אנשים קשורים

1.1 הסף הקובע להגדרת “איש קשור” לעניין החזקה באמצעי שליטה בתאגיד בנקאי או בתאגיד בנקאי השולט בו הופחת מ-10% ל-5% 2. הפחתה זו תביא להרחבת מעגל בעלי המניות בתאגיד בנקאי שיהפכו לאנשים קשורים וכפועל יוצא להרחבת האישורים שיידרשו להתקשרויות התאגיד הבנקאי בעסקאות איתם.

בנוסף, נב”ת 312 מגביל חבות של בעל מניות כאמור, אשר אינו נמנה על קבוצת השליטה של התאגיד הבנקאי, כך שלא תעלה בכל עת על 5% מהון התאגיד הבנקאי. כאמור חבויות של גורמים אלו כלפי הבנק גם תחושבנה לכאורה במסגרת היקף החבויות המקסימאלי של כלל האנשים הקשורים.

1.2 בבנק ללא גרעין שליטה, איש קשור ייחשב גם מי שהציע מועמד לכהונת דירקטורוכן קרובו (וזאת למשך כהונת הדירקטור) כאשר גם עליו תחול מגבלת החבות כאמור בסעיף 1.1 לעיל.

1.3 כלל נושאי המשרה בתאגיד הבנקאי, בתאגידים באמצעותם מוחזקים אמצעי השליטה של קבוצת השליטה בתאגיד הבנקאי ובתאגיד כאמור בסעיף 1.1 לעיל, וכן קרוביהם, ייחשבו כאנשים קשורים. עוד קובע התיקון כי חבותו של נושא משרה לתאגיד הבנקאי, למעט כהלוואה לדיור, לא תעלה בכל עת על מיליון ש”ח3.

1.4 הוראה מרחיקת לכת שנקבעה בתיקון, הינה כי כל בעל מניות המחזיק ב-10% ויותר מסוג כלשהוא של אמצעי שליטה בתאגיד שהתאגיד הבנקאי שולט בווקרובו, ייחשבו כאנשים קשורים. חבותו של בעל מניות שכזה לא תעלה בכל עת על 5% מהון התאגיד הבנקאי (בנוסף כאמור להכללת החבויות במסגרת היקף החבויות המקסימאלי של כלל האנשים הקשורים לתאגיד הבנקאי, קרי 10% מהון התאגיד הבנקאי).

השינוי יחיל, לראשונה, את ההגבלה האמורה על בעלי מניות בחברות בנות של התאגיד הבנקאי, הגם שאינם מחזיקים כלל בתאגיד הבנקאי עצמו. כך, לגבי בעלי מניות בחברה בשליטת בנק, אשר עד כה הורשו להתקשר בעסקה עם חברת האם מבלי שיחולו המגבלות מכוח נב”ת 312 בעניינם, הבנק יצטרך לאשר ההתקשרות עימם בועדת הביקורת או בועדה לעסקאות עם אנשים קשורים, וחבותם תוגבל לשיעורים האמורים לעיל.

להוראה זו יכול שתהיה נפקות לעניין מערכת היחסים שבין מספר קבוצות עסקיות במשק לבנקים, וייתכן והיא עשויה להשפיע על המוכנות של גופים אחרים להשקיע בחברות שבשליטת בנקים.

1.5 נוספה סמכות למפקח על הבנקים להרחיב או לגרוע מהגדרת המונח “איש קשור” וכן לקבוע כי עסקה עם איש קשור נעשתה בתנאים החורגים מתנאי שוק ולהורות על ניכוי החבות בגינה מההון הרגולטורי.

2. התווית מדיניות ונהלים

2.1 דירקטוריון תאגיד בנקאי נדרש לקבוע מדיניות ותהליכים לאישור עסקאות עם אנשים קשורים וכן נהלי בקרה, ניטור, דיווח ומעקב אחר עסקאות מהותיות עם אנשים קשורים לאחר שניתנה המלצת ועדת הביקורת או הועדה לעסקאות עם אנשים קשורים.4 נראה כי יהיה מקום לבחון את הממשקים של המדיניות והנהלים שייקבעו לעניין זה עם אמות מידה שנקבעו על ידי ועדת הביקורת בהתאם לסעיף 117 לחוק החברות, תשנ”ט – 1999 בקשר לאישור וחריגות עסקאות עם בעלי שליטה ונושאי משרה, ככל שנקבעו.

2.2 כמו כן, דירקטוריון תאגיד בנקאי נדרש לקבוע קווים מנחים לסיווג עניין אישי של נושא משרה באישור עסקה בהתאם לאמור בנוהל בנקאי תקין 301, המסדיר היבט זה בנוגע לעבודת דירקטורים בתאגיד בנקאי. קביעת קווים מנחים אלו עולה בקנה אחד עם מגמת הרחבת החבויות על נושאי משרה והשוואתם לאלו החלות על דירקטורים, כפי שבאה לידי ביטוי בתיקונים השונים בנב”ת 312.

3. עדכון הרף הנדרש לשם אישור עסקאות עם אנשים קשורים

3.1 סכומי החבות של איש קשור בעסקה בה (או כתוצאה ממנה) המחייבים אישור ועדת הביקורת או הועדה לעסקאות עם אנשים קשורים עודכנו לגבוה מבין 100,000 ש”ח או 0.1% מהונו של התאגיד הבנקאי.

3.2 כל עסקה עם איש קשור יחיד בסכום העולה על 500,000 ש”ח, ועם נושא משרה בתאגיד הבנקאי, קרובו או תאגיד בשליטתם בסכום העולה על 250,000 ש”ח, מצריכות אישור ועדת הביקורת או הועדה לעסקאות עם אנשים קשורים.

3.3 לגבי עסקאות אחרות הובהר, כי לעניין פיקדונות ותנאי ניהול חשבון לא נדרש אישור ספציפי, אם התנאים נקבעו על פי הסכם מסגרת ארוך טווח.

4. מבחן העסקאות דומות

חודדה הדרישה לפיה תאגיד בנקאי לא יתקשר בעסקה עם איש קשור בתנאים מועדפים למקובל בעסקאות דומות הנערכות עם אחרים (בשונה מהניסוח הקודם שהתייחס ל”עסקה דומה” עם אחרים). זאת, על מנת למנוע אפשרות תיאורטית לאישור עסקה עם איש קשור בתנאים החורגים ממדיניות האשראי על בסיס עסקה חריגה אחת בלבד שביצע הבנק.

5. התאמות נדרשות ותחולה

הוראות התיקון לנב”ת 312 ייכנסו לתוקפן החל ב-1 בינואר 2015. כאשר מדובר בחבויות של מי שהפך לאיש קשור בשל תיקון הנוהל, ככל שאלו עולות על המגבלות שנקבעו בנב”ת, ניתן יהיה להסדירן על ידי הבנק בהדרגה בתוך שנתיים ממועד כניסת התיקון לתוקף.

מטבע הדברים, מזכר זה כולל סקירה תמציתית וכללית בלבד של עיקרי השינויים שנערכו בנב”ת 312


1 הון לעניין נב”ת 312, הינו רובד 1 לאחר התאמות פיקחויות כמשמעו בנב”ת 202.

2 חריגה זמנית, שאינה מכוונת, של עד 60 יום, לא תחייב כסיווג כ”איש קשור”.

3 האמור לא חל על בעל שליטה המכהן כדירקטור בתאגיד הבנקאי.

4 בכל מקרה, מתן אשראי לאיש קשור העולה על 0.5% מהונו של התאגיד הבנקאי ידווחו לדירקטוריון.

GKH Sponsors Geektime Conference ’14

GKH is a sponsor for the Geektime Conference ’14 which takes place on September 3, 2014 at the Ocean Conference Center, at the Tel Aviv Fairgrounds.

Geektime Conference ’14 is the largest Startup conference held in Israel. The conference continues the TWS tradition which began 7 years ago with tackling the do-or-die issues in the Israeli startup and Venture Capital scene alongside presenting the hottest new startups in the Israel.

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Workers Equal Pay Law

  • Amendment to the Male and Female Workers (Equal Pay) Law – Corporate duty to report:

Amendment No. 3 to the Male and Female Workers (Equal Pay) Law has entered into effect recently. This Amendment imposes on entities that are subject to a reporting duty regarding the wages of workers or officeholders – a duty to also refer to gender.

This means that where a reporting duty attaches to an entity regarding the wages of the employee or an officeholder, that entity is required to make reference also to the employee’s or officeholder’s gender, due to the legislator’s intent to increase transparency in such matters.

This duty applies to the following entities:

  1. A budgeted or supported entity as defined in the Budget Fundamentals Law, in section 33 of the Law, namely a body corporate that has been set up by, or in whose budget, the government participates, or a body corporate that has been prescribed by statute to be a supported entity, and includes local authorities, religious councils, the Bank of Israel, government companies and municipal company.
  2. A non-profit society that has been set up pursuant to the Non-profit Societies Law, 5740-1980, in the framework of the annual financial statement that it is required to issue.
  3. Everybody corporate whose securities have been issued to the public according to a prospectus or are traded on the stock exchange, and to which there consequently apply the Securities (Periodic and Immediate Reports) Regulations, 5730-1970. That is to say, the Amendment applies to every public company.
  4. All water and sewerage corporations whose function is to provide a public service, and to which in consequence, the Water and Sewerage Corporations (Periodic and Immediate Reports) Rules, 5770-2010 apply.

 

  • New Extension Order in the Cleaning Industry:

Many companies throughout the economy regularly outsource cleaning and maintenance services contractors on their premises.

Necessarily, the payment charged by the cleaning and maintenance contractors for their services derives, inter alia, from the cost of their employees’ wages.

The Minister of Finance signed an Extension Order to the terms of the general collective wage agreement in the cleaning industry on 11 July, 2013, ruling that from 1 March, 2014 onwards (subject as hereinafter provided), the terms of the agreement as extended will apply to all workers employed in cleaning or maintenance work by employers in the cleaning or maintenance industry (hereinafter: “the Extension Order”). The Extension Order enhances the pay and fringe benefits of cleaning and maintenance workers  (that will, for convenience, be jointly referred to as “Cleaning Workers”)  and is thus expected to significantly increase the costs of their employment – such increase will be in excess of 20% simply due to the direct wage costs for an employee in the first year. As a result, the expenses of the outsourcing service-customer are expected to rise.

Note that according to the terms of the Labor Law Increased Enforcement Law, 5772-2011, the outsourcing service customer is responsible for not entering into an engagement on terms which can cause financial loss to the cleaning contractor and thus will be liable under a duty to take reasonable measures to prevent the erosion of the Cleaning Workers’ rights that work at his premises.

The Extension Order increases the minimum wage in the industry to NIS 24.98 per hour, provides entitlement to an advanced training fund (as from 1 October 2014) and to a seniority increment, grants privileges in excess of the provisions prescribed by statute relating generally to annual vacation, sick leave and holiday allowance, provides for beneficial pension rights (up to 22.83% of the contributions that will also reflect the holiday allowance, increments for overtime and travelling costs) and more.

In addition, the Order prescribes the rights of Cleaning Workers when employers change (substitutions of cleaning contractors by the service customer).

It is important to note that there is no obligation to transfer any payment to the cleaning contractor to cover the cost of accrued vacation, accrued holiday allowance and/or contributions to severance pay which have accrued to the credit of the employees in the past. Having said that, from now on, the terms of the Order in all the matters described therein must be complied with.

 

  • Update of the value of the maximum daily travelling costs

An Extension Order has also been published regarding the employer’s participation in employee’s travelling costs, which updates the reimbursement rate of the travelling expenses from 1 January 2014 onwards, retroactively to a maximum amount of NIS 26.40 per working day.

We would mention that the duty to pay for the reimbursement of travelling expenses shall be in accordance with the employee’s actual expenses up to the maximum amount mentioned or the monthly cost of a  monthly travel card (‘Hofshi hodshi),  the lower of the two.

The remainder of the Extension Order Rules remain unchanged.

 

  • New judgment clarifying the activity framework and power of the Commissioner of the Women’s Labor Law

We would remind you that an absolute prohibition applies to the dismissal of a female employee who is pregnant during the period of her pregnancy, maternity leave and during the period following the employee’s return to work (hereinafter: “the Protected Periods”). There is however an option of filing an application with the Commissioner of Women’s Labor Law to allow the dismissal, there being no other method to dismiss such an employee until after a permit has been received.

The Commissioner, in her general overview of the benefit of the employee, does not easily permit the dismissal of a female employee during the Protected Periods, and on many occasions, determines in her decisions that although dismissal is permitted, it will only enter into effect on a date falling after her decision, that is, on the date on which the employee begins maternity leave.

The Labor Court recently handed down a new judgment per the Honourable Justice Ariela Gilzer-Katz in Labor Case – 3727-03-13 Yaniv Marketing Strategies Ltd., v. Naama Gur Ari, that was brought against a decision of this kind.

In that case, the employee was in the seventh month of her pregnancy. The Commissioner  determined  that  she  was  persuaded that the employee’s dismissal had not resulted from her pregnancy and affirmed the dismissal but only from the date of the employee beginning maternity leave, namely, some two months after the making of the decision.

The parties have appealed the Commissioner’s ruling.

Two rulings were held in the judgment:

The first – in the framework of making a decision with regard to the dismissal of an employee who is pregnant, and which does not result from the pregnancy itself, the Commissioner is entitled to consider other factors – namely, the employee’s condition, but such considerations are subject to increased judicial review and the interests of the female employee are not specifically to be preferred as against those of the employer, and the employer need not act as a “deep pocket”.

Secondly – rulings that recur in the Commissioner’s decisions to the effect that the employee will remain at work until she takes maternity leave, are unlawful and are inconsistent with the provisions of the Women’s Labor Law, and in the framework of the decision, the Commissioner has three options only: to permit the dismissal on the date of the decision; permit the dismissal retroactively or not permit the dismissal at all.

We believe that these rulings are material and could clarify the working framework of the Commissioner and her power.

 

For additional information please contact Yael Dolev, Partner, Head of Labor Law,

Tel +972 (3) 6074800 email yaeldolev@gkh-law.com.

GKH CYBER UPDATE

Better to Be One Step Ahead

 

U.S. NIST releases a Framework for Improving Critical Infrastructure Cybersecurity.

 

On February 12, 2014, the U.S. National Institute of Standards and Technology released the first version of the Framework for Improving Critical Infrastructure Cybersecurity.

The purpose of the Framework is to enhance the security and resilience of critical infrastructure and to maintain a cyber-environment that encourages efficiency, innovation, and economic prosperity while promoting safety, security, business confidentiality, privacy and civil liberties.

The Framework provides a methodology for how organizations can address privacy implications of cybersecurity activities, such as monitoring or information-sharing, which are explicitly addressed by the Framework.

It was created through collaboration with the private and public sectors, multiple workshops were held and hundreds of public comments were received on the preliminary Framework which was released in October 2013. It provides a set of voluntary measures which can be used by corporations to address cybersecurity risks.

The Framework consists of three parts: the Framework Core, the Framework Profile and the Framework Implementation Tiers, as described below:

  • Framework Core:

The Core consists of five Functions – Identify, Protect, Detect, Respond and Recover. Together, these Functions are supposed to provide a high-level, strategic view of an organization’s management of its cybersecurity risks. For each Function, the Framework Core also identifies underlying Categories and Subcategories (a subdivision of the Functions into groups of cybersecurity outcomes and into specific outcomes of technical and/or management activities) and matches them with example Informative References such as existing standards, guidelines, and practices for each Subcategory.

  • Framework Profile:

The Profiles represent outcomes (current or desired) based on an organization’s selected Categories and Subcategories. A Profile can be described as the alignment of the Framework Core with the business requirements, risk tolerance, and resources of an organization. Profiles can be used to identify opportunities for improving the cybersecurity state of an organization.

To develop a Profile, an organization can review the Core’s Categories and Subcategories and determine which are most important; Categories and Subcategories may be added as needed in order to address the organization’s specific risks.

  • Framework Implementation Tiers:

The Implementation Tiers provide context as to how organizations view cybersecurity risks and the processes they have in place for the management of such risks. The Framework Implementation Tiers reflect the degree to which an organization’s cybersecurity practices are in line with the Framework. The Tiers characterize an organization’s practices as Partial (Tier 1), Risk Informed (Tier 2), Repeatable (Tier 3), or Adaptive (Tier 4). These Tiers reflect an increasing degree of strictness and sophistication in an organization’s practices, they progress from informal, reactive responses to more agile and risk-informed cybersecurity risk management practices.

Please Note: While organizations identified are encouraged to consider moving toward higher Tiers, it is only encouraged when such a change would reduce cybersecurity risks and be cost effective. Successful implementation is based upon achievement of the outcomes described in the organization’s “Target” Profile and not upon Tier determination.

 

Practical implications

Although the Framework is voluntary, organizations should expect to see wide-ranging efforts by the U.S. government to encourage its use. It is also likely that the Framework will be referenced in regulatory proceedings, commercial and government contracts and litigation filed following data security breaches.

It is most possible that the Framework will become a benchmark for assessing reasonableness of cybersecurity practices.

 

Our recommendations:

  • Offer cybersecurity solutions relating to as many Categories and Subcategories as possible, and in alignment with as many Informative References as possible.
  • Address privacy and civil liberties implications and consider how cybersecurity program might incorporate privacy principles such as: data minimization in the collection, disclosure, and retention of personal information material related to the cybersecurity incident.
  • Use limitations outside of cybersecurity activities on any information collected specifically for cybersecurity activities; transparency for certain cybersecurity activities; individual consent and redress for adverse impacts arising from use of personal information in cybersecurity activities; data quality, integrity, and security; and accountability and auditing.
  • Focus on the back end of process – “respond and recover” as much as “identify and protect/detect” – not everything will be stopped at the firewall and companies with CI will be looking for full solutions.
  • If your organization is already subject to data security or privacy regulations or is subject to any Israeli or foreign export control, try to identify whether and how the implementation of the Framework can complement and ideally support the existing compliance programs and comply with the applicable export control and privacy law obligations.

For further information regarding the Framework: http://www.nist.gov/cyberframework/

 

Privacy Matters

 

The Israeli Privacy Protection Law, 5741-1981 (the “Privacy Law”) and related regulations constitute a comprehensive arrangement to provide a high level of privacy protection to data subjects, including the protection of personal data processed in a Database (in general, collection of data, kept by a magnetic or optical means and intended for computer processing, as such term is further defined in the Privacy Law). A Database which is either held, managed, or owned in Israel (regardless of the physical location of the servers hosting the data), is deemed subject to the Privacy Law.

Any entity which holds, manages and/or owns a Database in Israel is subject to the Privacy Law and its regulations. The Privacy Law imposes obligations on such entities and on the use of the data held in such Database. The major substantive data protection obligations under the Privacy Law includes the following:  (i) a requirement to receive the data subjects’ consent prior to the collection and use of personal data; (ii) a requirement to notify the data-subject regarding the purposes for which its data is collected and regarding any transfer of its data to a third party; (iii) the owner of any Database must take reasonable measures to secure the confidentiality of the data contained in the Database; (iv) the owner of a Database must allow data-subjects to access and inspect any information about them which is kept in the Database and shall allow them, upon their demand, in certain circumstances, to amend or delete the information; (v) a requirement to register the Database with the Israeli Database Registrar under certain circumstances; and (vi) a requirement to use the information held in Database only for the purpose for which such Database was established. In addition, there are specific regulations which govern the authorized transfer of information held in databases in Israel to other countries.

Owning, holding or managing a Database in Israel in breach of certain obligations under the Privacy Law may carry both civil and criminal sanctions.

 

Our Recommendations:

  • In the event that your organization holds, manages or owns a Database in Israel (regardless of the physical location of the servers hosting the data) then you should verify that your organization complies with the Israeli Privacy Law’s requirements (including without limitation the requirement to register a database with the Israeli Database Registrar).

 

  • In addition, if your organization transfers information held in its Database in Israel to another countries, you should verify that such transfer is conducted in accordance with the provisions of the Israeli Privacy Laws and regulations.
  • Address any required privacy and cybersecurity issues in any applicable agreements with third parties, which may include, for example, the following: (i) add restrictions under which the other party’s use of your software and/or the services will not be conducted in a manner that would violate applicable data privacy laws; (ii) add restrictions under which the other party is prohibited from using your software and/or services to track or collect personally identifiable information, unless it had received the applicable data subject’s consent as required under any applicable law; (iii) add, to the extent applicable, reference to compliance with applicable laws, treaties and regulations in connection with the  laws pertaining to security breaches, data privacy, data intrusion, and the transmission of technical or personal data; and (iv) add, to the extent applicable, reference to an obligation to maintain reasonable administrative, physical, and technical safeguards designed for the protection, confidentiality and integrity of users’ data (which may include physical access controls, encryption, Internet firewalls, intrusion detection, and network monitoring).

Export Laws – Israeli perspective

 

The State of Israel regulates the use of encryption means through the Order Governing the Control of Commodities and Services (Engagement in Encryption Items) – 1974 (the “Encryption Order“). In order to regulate engagement in this field, the Israeli Ministry of Defense (“IMOD“) has instituted a system of control and licensing for items of  encryption.According to the Encryption Order, engagement with encryption Means may be made only subject to obtaining the applicable permit from the IMOD and in accordance with the terms of such permit. The Encryption Order also includes a comprehensive definition of the term “Engaging in Encryption Means”, which includes, inter alia, development, production, integration, sale, import and export of Encryption Means. A breach of the Encryption Order may carry both civil and criminal sanctions.

The Encryption Order defines three categories of licenses for engagement in Encryption: (a) a General License (issued with no time limit to its validity) – a license for a particular Encryption item which allows the license-holder free use of that item (other than modifications or integration that essentially creates a new item for which a separate license  is required);  (b)  a  Special  License  (generally  valid  for  one  year)  – a license for specific engagement (generally involving sales to clients who do not fall under the restrictions imposed on an applicant for a Restricted License; and (c) a Restricted License (generally valid for one year) – a license that imposes restrictions on engagement in encryption items (which may restrict the nature of permissible sales (e.g. restriction on selling to certain countries and sectors)). We note that, in general, an IMOD permit is not required for purchase, use, holding, transfer, distribution, sale, export of “Free Means”, which is defined as an item of encryption which the Director-General of the IMOD has granted a General License with respect thereto or the Director-General of the IMOD has defined the item of encryption as a “Free Means” (a full list of such “Free Means” can be found at: http://www.mod.gov.il/pages/encryption/freeMeansSearch.asp).

 

Our recommendations:

 In the event that your organization engages in Encryption Means (i.e., develops, produces, integrates, sells, imports or exports Encryption Means), including in the event that your organization’s product incorporates any Encryption Means, you should consult with counsel to determine whether your organization is required to receive a permit from the IMOD for such specific use and product.

 

 

For additional information please contact Adv. Heather Stone, Partner, Tel +972 (3) 6074520 email heather@gkh-law.com, or Adv. Sharon Kadosh, Tel: +972 (3) 607 4527, emailsharonka@gkh-law.com, or Adv. Ella Tevet, Tel +972 (3) 6074541 email ellat@gkh-law.com

Waiver of Consideration for “Service Inventions”

Waiver of Consideration for “Service Inventions” – Update

A recent decision handed down by the Committee for Compensation and Royalties (the “Committee“) formed under the Israeli Patents Law – 1967 (the “Patents Law“) appears to restore natural order in respect to Israeli employers’ ability to preclude their employee’s right to receive consideration for inventions conceived in the course, and as a result, of their employment. The decision minimizes monetary exposures of Israeli R&D companies with respect to claims and demands by their employees to receive consideration with respect to such inventions.

Legal Premise

Section 134 of the Patents Law grants employees the right to receive consideration for “Service Inventions” (inventions conceived in the course, and as a result, of their employment) unless otherwise agreed upon in a separate agreement between the parties. The Section also provides that where “there is no agreement that prescribes whether, to what extent, and on what conditions the employee is entitled to remuneration for a service invention“, the entitlement to consideration and its amount shall be determined by the Committee.

In the matter of Ilani1, the Committee held that an employee’s right to receive consideration for Service Inventions is a personal right and is entirely separate from the proprietary rights in such Service Inventions. Such right shall not be assigned to the employer (to the extent such right is assignable). Under the circumstances of Ilani, the employee assigned and transferred all proprietary rights in the Service Invention to the employer. The Committee held that in such circumstances the employee’s assignment of proprietary rights to the employer does not preclude the employee’s right to receive consideration under Section 134. The Committee further held that such right must be explicitly waived by the employee (for example, by referring to Section 134 of the Patents Law).

In the matter of Plurality2, the Israeli Supreme Court did not determine whether an employee’s right to receive consideration under Section 134 of the Patents Law can be waived or not and further held that the existence of an explicit waiver of Section 134 of the Patents Law might not prevent the Committee from questioning the validity of the waiver.

Employers’ Monetary Damages Exposure

Following these rulings Israeli employers found themselves in a predicament: Signing a general intellectual property assignment provision and/or a general waiver, under which an employee waives any rights or claims against his employer (standard practices until the Ilani ruling) might not have been sufficient to protect the employers from future claims by their employees for consideration. Nevertheless, even if the employees explicitly waived such right, the Committee could question the validity of such waiver.

Therefore, in such circumstances, R&D companies were exposed to monetary damages from claims and demands made by their R&D employees to receive consideration under Section 134 of the Patents Law.

New Decision Rendered by the Committee (May, 2014)

On May 4, 2014, the Committee rendered a decision3 that minimizes Israeli employers’ exposure with respect to their employee’s right to receive consideration under Section 134 of the Patents Law.

The Committee clarified the uncertainty regarding the nature of the right under Section 134 of the Patents Law, and held that such right can be waived by the employee (i.e., the right is dispositive). It was explained that the right to receive consideration is not a social right which derives from the employment relationship requiring special protection. In addition, the Committee indicated that it is the legislature’s role to determine whether the right under section 134 of the Patents Law cannot be waived.

The Committee further held that not in every circumstance the employee’s waiver of his right to receive consideration under Section 134 of the Patents Law must include explicit reference to such right. Such waiver agreement can become crystallized like any other agreement (i.e., in writing, orally or implied by behavior) in accordance with the interpretation rules of the general Israeli contract laws.

In the specific circumstances of this matter, the Committee concluded that the employee waived his right to receive consideration under Section 134 of the Patents Law, based on two main reasons: (i) the employee signed certain documents which included clear and conclusive language providing that the employee does not and will not have any future claims against the employer (i.e., in general, he does not and will not have, at any time, demands or claims of any kind against the employer, whether in tort or any other claim). Such conclusive language should not be interpreted as to exclude future claims with respect to rights under Section 134 (even if the employee had no specific knowledge of such right); and (ii) such documents were signed within the framework of the employee’s termination of his employment (under which the employer transferred certain funds to the employee). The Committee held that such circumstances support the conclusion that both parties’ intention was that by terminating their employment relationship, the employee waived any claims that he may or will have in the future against the employer.

Conclusion:

Such decision appears to restore natural order in respect to Israeli employers’ ability to preclude their employee’s right to receive consideration for Service Inventions: the right under Section 134 of the Patents Law can be waived by the employee. The Committee will examine, on a case by case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. In the event that the employee’s and employer’s intention is to end their relationship and to prevent any future lawsuits then the Committee will see such understanding as including the employee’s waiver of future claims under Section 134 and will probably not question such understanding.

We note that such decision does not change the previous ruling which enables the Committee to examine the validity of employee’s waiver. However, this decision clarifies that in certain circumstances, such waiver does not necessarily have to be explicit. Such waiver can be learned from the circumstances of the specific matter.

 

As a matter of practice, although such decision seems to alleviate the requirement to obtain explicit waiver under Section 134 of the Patents Law, we continue to recommend drafting employment agreements with explicit waivers, in order not to leave the interpretation open to the Committee.

 

For additional information please contact Adv. Ella Tevet, Tel: +972 (3) 6074541, email ellat@gkh-law.com

 

1 Actelis Networks v. Ishai Ilani, Application to determine remuneration for service invention (2010).

[2]LCA 3564/12 Dr. Bayer v. Plurality Ltd (in Liquidation) et al.(2012).

[3]Ploni v. Company Ltd, Application for ruling of consideration for service inventions (2014).

Imposition of a Pledge on a Securities Account

Legal Precedent of the Israeli Supreme Court regarding the Imposition of a Pledge on a Securities Account

In Civil Appeal 1339/12 Bank Mizrahi-Tefahot Ltd. v ICM Air-conditioning Manufacturer Ltd. (in liquidation) (the “ICM Case“), the Israeli Supreme Court provided its extensive and clear view of  important matters in connection with creating and perfecting a pledge on securities, which are traded on the Tel Aviv Stock Exchange (“TASE“) and which are deposited in a client account, in favor of the bank.

In practice, Israeli banks tend to have their clients sign a general terms and conditions agreement, which normally includes a general provision stating that the bank has a charge, pledge, set-off and lien rights over any asset of the clients deposited in the bank account.

In the ICM Case, the court ruled that a charge created by virtue of such general provisions, shall be effective only between the parties (i.e. the client and the bank), but shall have no force and effect vis-à-vis third parties and/or in case the pledgor becomes subject to insolvency proceedings, if the pledge was not perfected in accordance with the requirements of Israeli law. The perfection of the pledge will be achieved, in the case of shares which are traded on a stock exchange, by way of registration of the charge with the Israeli Registrar of Companies, if the pledgor is a company, or with the Israeli Registrar of Pledges, if the pledgor is an individual. The court emphasized that a pledge on shares which are traded on a stock exchange cannot be perfected by way of deposit of such securities with the creditor (although Israeli law does acknowledge the creation of a pledge by way of deposit), and that perfection of a pledge by way of deposit can only apply to securities which are evidenced by a physical document which can be deposited, such as bearer securities.

The Court noted that if there are no insolvency proceedings, a pledge created on shares which are traded on the TASE could still be independently realized by the bank (even if not perfected) in accordance with the provisions of the Israeli Pledge Law, without the bank being required to apply to the Israeli court or Execution Office. It should be noted that the right to independently realize a pledge under Israeli law is granted only to specific entities, such as banking corporations which are licensed under Israeli law.

In an Obiter Dictum the court referred to one of the most common questions in the context of pledging shares which are traded on a stock exchange, namely the question whether a pledge over a securities account can be a fixed pledge (as opposed to a floating pledge).The question arose because a pledge on securities which are traded on a stock exchange normally includes the borrower’s right to sell such securities and therefore applies to a changing number of securities, hence such pledge may be viewed as a floating pledge, which is subordinate to the rights of certain creditors (such as employees and tax authorities). Notwithstanding such characteristics, the court expressed its view that such pledge can be classified as a fixed pledge, thereby granting the bank (as creditor) a stronger protection.

 

For additional information please contact Adv. Rona Bergman Naveh, Tel: +972 (3) 607 4430, email rona@gkh-law.com, or Adv. Yael Hershkovitz, Tel +972 (3) 607 4576, email yaelfr@gkh-law.com

Rule 10b-17 Compliance – Reminder

Rule 10b-17 Compliance – Reminder for OTC Listed Companies

 

Companies with shares publicly traded on a national exchange in the United States (“National Exchange Companies”), such as the NYSE or the NASDAQ, as well as companies with securities listed over-the-counter (“OTC Companies”), such as on OTCQB or OTC Pink, must comply with the disclosure requirements of Rule 10b-17 (“Untimely Announcements of Record Dates”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Rule 10b-17 applies to any issuer that has a “class of securities publicly traded by the use of any means or instrumentality of interstate commerce.” In general, the rule requires an issuer to file certain information with the Financial Industry Regulatory Authority (“FINRA”) at least 10 days prior to the record date of certain corporate actions, such as cash and stock dividends, stock splits or reverse splits, or rights or other subscription offerings.

 

In 2010, FINRA enacted Rule 6490 which codifies the requirements of Rule 10b-17, requiring issuers to provide timely notice to FINRA of such certain corporate actions and other corporate actions, such as mergers, acquisitions and bankruptcies. Rule 6490 applies to both National Exchange Companies and OTC Companies. FINRA may also review an issuer corporate action based on third party information when it believes that such action is necessary to protect the market and the investors1.

 

An issuer that fails to notify FINRA of a proposed corporate action potentially violates 10b-17 of the Exchange Act and may be subject to significant sanctions.2

 

OTC Companies in particular should keep in mind their compliance requirements under Rule 10b-17 because National Exchange Companies are subject to stock exchange rules that typically impose comparable requirements of which most National Exchange Companies are already aware.

 

SEC issues a Staff Report on Review of Disclosure Requirements in Regulation S-K

 

In December 2013, the U.S. Securities and Exchange Commission (“SEC”) released its report regarding the SEC staff review of the disclosure requirements under Regulation S-K, pursuant to Section 108 of the Jumpstart Our Business Startups Act (the “JOBS Act”). The full report can be found here.

 

Regulation S-K is a central depository of the disclosure provisions applicable to offerings by U.S. domestic issuers.  The registration forms and regulations often refer to the disclosure requirements in Regulation S-K rather than repeating the requirements in each registration form and regulation.  The purpose of the review was to evaluate ways in which the disclosure requirements can be simplified and modernized for all issuers.  In the report, the SEC stated that in light of technical advances in the ways that businesses operate and communicate with investors and the ways that capital markets function and how market participants receive and use information, it believes that the disclosure requirements should be reevaluated to ensure that relevant and adequate information is disclosed to the investors.

 

The report mentions a few potential areas for further study, including (i) a principle-based approach disclosure (similar to management discussion and analysis (MD&A) provided by issuers), (ii) evaluation of whether further “scaled” disclosure requirements, in which the disclosure requirements vary depend on the size of the issuer, should be applied (resulting in simpler disclosure requirements for smaller issuers), (iii) evaluation of the methods of information delivery and presentation, for instance a “company profile” with information that changes infrequently, while other information would be provided more regularly; and (iv) improving the readability of disclosure documents and discouraging repetition (such as through the use of hyperlinks).

 

The staff also identified a few specific areas that should be further reviewed, such as (i) combining sections related to risk factors, legal proceedings and risk information into one requirement, (ii) review of description of business and properties disclosure requirements for continuing relevance (for instance, many businesses no longer require a physical presence or can easily substitute their physical locations without any material impact on their businesses), (iii) reviewing corporate governance disclosure to confirm that material information is presented effectively; for instance, including information in a filing only when changes occur should be evaluated; and (iv) addressing concerns that executive compensation disclosure is too long and technical.

 

It is too early to assess the impact of this report on disclosure practices in the future; however, if some of these principles are adopted, it may impact disclosures made by foreign private issuers, including in their Annual Report on Form 20-F.

 

Power Shift to Shareholders Reinforces Need to Engage Shareholders

 

A series of legal and structural changes in the U.S. corporate governance and proxy voting landscape have increased shareholder power in recent years.  More dependent on the support of shareholders than ever before, U.S. companies have begun to respond by providing shareholders with more thorough and thoughtful proxy disclosure, and by engaging with shareholders in novel ways during the non-proxy season.  At the same time, shareholder activism has gone mainstream, reinforcing the trend to engage with shareholders as a way to inoculate those shareholders against supporting an activist agenda.  All companies with U.S. shareholders should be aware of these trends and consider what steps to take in this era of growing shareholder power.

 

Shareholder power has been increasing for several years as various proxy “fixes” and “plumbing changes” have been either imposed by regulators or widely adopted by corporate America in response to shareholder pressure.  Majority voting has largely replaced plurality voting for uncontested director elections at larger companies, and voting by brokers for such elections without explicit directions from the shareholders they represent has been eliminated.  Poison pill and classified boards arrangements have been repealed and now exist only at a minority of large public companies.  By Securities and Exchange Commission (“SEC”) rulemaking, companies may no longer easily exclude proxy proposals by shareholders for annual or special meetings to permit direct shareholder nomination of directors.  Finally, all domestic U.S. companies registered with the SEC (but not foreign private issuers) are now required to hold a non-binding shareholder vote on executive compensation at least once every three years (“Say-On-Pay”).

 

With shareholder power on the rise, institutional investors, prompted by a different SEC rule change requiring them to adopt procedures to ensure that they vote their securities in the best interest of their clients, have increasingly turned to proxy advisory firms to help manage the voting process.3  Without the resources to adequately investigate proxy proposals at each public company in their portfolio, many institutional investors meet their regulatory obligations by relying heavily on the views expressed by these third party advisory firms.  However, fueled by the tremendous growth in the institutional ownership of public company shares, these advisory firms have amassed immense and increasingly controversial power.  For example, Say-On-Pay proposals that receive negative recommendations from such proxy advisory firms receive on average 30% less shareholder support than those that receive positive recommendations.4

 

Provided with more tools to influence corporate behavior than ever before, shareholders are increasingly pushing for changes in corporate policy and behavior.  Unlike shareholder activism of a generation ago, today’s activists are better funded, more sophisticated, and, perhaps because a succession of corporate corruption scandals have reduced trust in corporate management, often receive far more support than did prior efforts.  While many activists remain focused on encouraging corporate strategic alternatives, share buy-back programs, and greater dividend payouts, a growing number push for more incremental change and have indicated that they intend to remain involved for the long-term.  In addition, new activist hedge funds have emerged in recent years who have amassed billions of dollars that they direct toward the targets of their activism.  Rather than routinely supporting management and shunning such activists as they once did, institutional investors have done an about face in recent years and increasingly side with activists (sometimes even investing in activist hedge funds).  Finally, the media increasingly portrays shareholder activists in a positive light as corporate reformers, rather than as in a negative light as corporate raiders.

 

Faced with increasing pressure from shareholders generally and activists in particular, and under the watchful eye of proxy advisory firms, companies have responded.  First, they are enhancing disclosure in proxy statements regarding such hot button topics as executive compensation, board composition, and audit committee reporting.  In addition, they are increasingly highlighting in proxy statements their outreach efforts to shareholders and any changes made in response to shareholder feedback.5 Second, companies are more frequently communicating with shareholders outside of the proxy season in order to generate goodwill and support for company policies – before any proxy issues or activist shareholders arise.  This communication takes a variety of forms, including one-on-one meetings between shareholders and company officers and/or directors and more lengthy dialogues with important institutional shareholders.  In other words, shareholder meetings are not just for IR departments anymore.  This trend marks such a radical departure from the much more limited contact with shareholders in decades past that the current period has been called the “The Era of Engagement”.6

 

In light of these changes, all companies with U.S. shareholders should periodically review their corporate governance structures before being forced by shareholder pressure to do so.  In addition, companies should pay more attention to their shareholder base by monitoring that base for changes in shareholder composition and warning signs of pending shareholder activity or discontent in the ranks.  For example, this could include more closely monitoring quarterly conference calls, internet traffic, and public beneficial ownership filings.  In addition, companies should consider appropriate outreach efforts to shareholders throughout the year.  Such efforts are most effective if initiated before the pressure of an important proxy vote or even greater pressure of a proxy challenge.  The risks to your company associated with doing nothing may have become too great to ignore.

 

 

 For additional information please contact Adv. Perry Wildes, tel: 03-6074520 or email perry@gkh-law.com

 

1 INRA Regulatory Notice 10-38 “Obligation of Issuers to Provide Notice of Company-Related Actions”

2 Id.

3  Two proxy advisory firms dominate this sector: Institutional Shareholder Services, and Glass, Lewis & Company.

4 “Say on Pay, A Review of Key Vote Results and Trends”, Towers Watson, May 28, 2013 (available at: https://www.boardmember.com/uploadedFiles/Home/Research/SayonPaySummary.pdf).

5 See “Key Developments of the 2013 Proxy Season”, Ernst & Young, June 2013 (available at: http://www.ey.com/Publication/vwLUAssets/Key_developments_of_the_2013_proxy_season/$FILE/Key-developments-of-the-2013-proxy-season.pdf).

6  “2013 Annual Governance Review”, Georgeson (available at: http://www.georgeson.com/us/resource/Pages/acgr.aspx).