​The legal provisions concerning the manner in which securities are offered and sold to the public are grounded in the Securities Law, 1968 (“the Law”). Section 15 of the Law defines the basic rule, that any offering or sale of securities to the public is permitted only on the basis of a prospectus whose publication was approved by the ISA. A public offering of securities may also be conducted on the basis of a draft prospectus published pursuant to the provisions of the Law.

In this context, securities are generally defined as certificates that are issued in a series by a corporation and confer a right of membership or participation in the corporation or a claim against the corporation, and certificates that confer a right to purchase securities.

A public offer is defined in the Law as an action designed to motivate the public to purchase securities, including requests to the public to make offers to purchase securities. In general, public offers can appear in a broad range of manners, including, online offerings, word to mouth offerings, and others.

The Law defines exceptions to this general rule; the main exceptions are listed below:

1. Where the offer or sale of securities is addressed to a small number of offerees (not exceeding 35) in any 12-month period. Securities thus issued are subject to regulations that restrict their resale during trading on the Tel Aviv Stock Exchange Ltd (“TASE”).

2. Any offer or sale to classes of investors listed in the Law, mainly including regulated institutional bodies; corporations with a minimum equity; a corporation’s officers and controlling owners; and individuals who meet minimum equity requirements and certain qualifications. Securities so issued are also subject to the regulations that restrict their resale during trading on the TASE.

3. A general publication of the intention to sell securities in the manner described above.

4. Issue of bonus shares.

5. Issue of securities as part of a court-supervised settlement proceeding under the Companies Law 1999, or as part of a class action (provided that the ISA is given an opportunity to express its position on the need for a prospectus).

6. An offer made during trading on the TASE.

7. An offering of securities by a corporation that is not a reporting corporation (as defined in the Law), and whose securities are not listed for trade outside Israel - to its employees. Such offering is subject to restrictions provided in the Law regulations, regarding the consideration and the share of the corporation’s capital offered, and also in light of such consideration and share of the corporation's capital allotted made in the same framework during the preceding year.

8. An offering by a corporation that is not a reporting corporation (even if to more than 35 investors), subject to restrictions (provided in the Law regulations) regarding the consideration amount, share of the corporation’s capital, and number of investors, as well as in light of number of investors and share of the corporation's capital previously allotted not according to a prospectus.

A corporation that is traded on one of the major world stock exchanges listed in the Law (currently –NASDAQ, NYSE, or LSE) may, subject to the conditions set forth in the Law and approval of the ISA, also list its securities on the TASE. Subject to certain conditions, such corporations may report to the shareholder public in Israel using the same reporting format that is required by the foreign stock exchange according to the law that applies in that country, as set forth in Chapter E3 of the Law.

Furthermore, a corporation that was incorporated outside Israel and offers its securities to the Israeli public is subject to the provisions of Section 39a of the Law. Section 39a of the Law applies to such corporations that wish to offer their securities to the public in Israel, certain provisions that differ from the provisions of Israeli Companies Law and its Regulations. Such provisions include mainly provisions concerning corporate governance, including the appointment of outside directors, and approval of transactions with related parties.

Over time, the courts in Israel have debated the interpretation of the terms noted above and concerning the application of the Law in certain cases. ISA regularly publishes position papers and responses to companies’ motions concerning these issues.

A public offering of securities in absence of a prospectus constitutes a violation of the Law, and the offender may anticipate the penalties prescribed by the Law.

The above review is a summary. The information contained therein is offered for informational purposes only; the information does not constitute legal advice. To make decisions on this issue, you are advised to also review the decisions of Israeli courts and ISA staff positions, among other things. You are also advised to seek proper legal counsel.