Does my Israeli company have to hold an annual general meeting, and can I do it from Australia?

Section 60 of the Companies Law 5759-1999 says a company shall hold an annual meeting each year and not later than fifteen months after the previous one. Section 61 then hands private companies a way out: the articles may provide that the company is not required to hold an annual meeting, save to the extent necessary for appointing the auditor. If the articles carry that provision, the company may not hold an annual meeting unless a shareholder or director demands one, and it must instead send shareholders financial statements once a year by the date on which the meeting would otherwise have been due.

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Detailed Answer

Foreign owners tend to discover which regime they are in at an awkward moment. Off-the-shelf Israeli articles frequently do include the Section 61 opt-out, but not always, and a company that owes annual meetings and has never held one is exposed in a specific way: under the Law a court may, on the application of a shareholder or director, order a meeting convened, and the directors responsible for the failure can be made to reimburse the company for what the applicant's court expenses cost it. That is a real risk in a company with a minority investor rather than a theoretical one. Where a meeting is required or wanted, the mechanics are undemanding for a private company. Notice must be given to everyone entitled to attend no later than seven days before the meeting and no more than forty-five days before it under Section 67. The quorum under Section 78 is two shareholders holding at least twenty-five percent of the voting rights, present within half an hour of the appointed time, and if there is no quorum the meeting stands adjourned by a week to the same day, hour and place. Shareholders in a private company may vote in person or by proxy under Section 83 unless the articles say otherwise. And Section 76 allows a private company to pass a resolution with no meeting at all where all shareholders entitled to vote consent in writing, which for a company owned by two brothers in Melbourne is the whole answer.

The point that catches non-resident owners is the difference between corporate housekeeping and statutory filings, because the two are unrelated and only one of them is forgiving. Skipping an annual meeting in a company whose articles allow it costs nothing. Skipping the annual report to the Companies Registrar or the annual fee does not: the company drifts into breaching-company status, its directors and shareholders lose the ability to make filings, and reinstatement is a paid, slow process. Three habits keep an Australian-owned Israeli company clean. Read the articles once and find out whether Section 61 was adopted, rather than assuming. Where meetings are required, use the written resolution route under Section 76 rather than arranging a call across a nine-hour time difference, and keep the signed resolution in the company's minute book, since it is what an acquirer's due diligence will ask for. And date the financial statements each year by the date the annual meeting would have fallen due, because that is the deadline Section 61 attaches to the opt-out. The filings that genuinely bite are set out in our answer on annual compliance for an Israeli company with foreign owners, and the leverage a shareholder has when the majority stops convening anything is described in our answer on minority shareholder rights in an Israeli company.

In Practice: Section 60 of the Companies Law 5759-1999 requires an annual meeting within 15 months of the last one, Section 61 allows a private company to disapply that in its articles, Section 67 sets notice for a private company at not less than 7 days and not more than 45 days, Section 78 fixes the quorum at two shareholders holding 25 percent of the voting rights present within 30 minutes, and Section 76 permits a resolution in writing signed by all shareholders entitled to vote. A shareholder holding at least 10 percent of the issued capital and 1 percent of the voting rights, or 10 percent of the voting rights, may demand a special meeting under Section 63, which the board must convene within 21 days. Amending the articles to adopt the Section 61 opt-out is a shareholder resolution filed with the Companies Registrar (Rasham HaHevrot), typically NIS 2,500 to NIS 5,000 in legal fees and registered within 7 to 14 days.

When to Consult a Lawyer

• There is an outside investor or a former founder on the register, where a failure to convene meetings feeds directly into an oppression claim under the Companies Law.
• The articles are the registrar's default form in Hebrew and nobody has read them since incorporation, so nobody actually knows whether the Section 61 opt-out applies.
• You are preparing the company for sale or for a funding round, where a minute book without the resolutions the articles required is a diligence finding that delays closing.

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Speak With an Israeli Attorney

An Israeli attorney can tell you within a day whether your articles carry the Section 61 opt-out, put the written resolutions in place for the years you missed, and amend the articles so the question stops arising.

Contact us for a confidential initial consultation.