In a recent ruling, the Israeli District Court of the Central District made significant determinations regarding the rights of holders of American Depositary Shares (ADS) issued by Israeli companies that are listed on NASDAQ. ADSs are securities issued by non-US companies listed on NASDAQ.
The plaintiff is an investment firm holding ADS securities issued by the respondent, an Israeli public company listed on NASDAQ. The plaintiff holds approximately 7% of the respondent and has been demanding management to execute certain changes in the respondent. The plaintiff asked to convene a shareholders meeting but was denied by management. The plaintiff claimed that it should receive rights equal to those of regular shareholders, particularly the right to convene a special shareholders meeting. The plaintiff argued that ADS holders cannot be deprived of the mandatory rights that shareholders have under the Israeli Companies Act, which applies to the responding company. This issue has not yet been discussed and determined by an Israeli or a US court.
The Court noted that the right to call a shareholders meeting, propose agenda items for the meeting, and vote in such a meeting are among the most important rights a shareholder has. Considering the general framework and the specific language of the documents pertaining to the ADSs in this matter, the Court ruled that as an Israeli company, the respondent cannot be exempt from the mandatory obligations imposed on it under the Israeli Companies Act. The Court established that ADS holders are entitled to certain shareholders’ rights, including the right to convene special shareholders meetings, set the agenda, and vote in such meetings.
This ruling is notable as it reinforces the rights of ADS holders, aligning them more closely with those of regular shareholders under the Israeli Companies Act. The ruling may encourage greater shareholder activism and engagement, especially among minority shareholders seeking to influence corporate governance.
For more information, please contact Adv. Ran Sprinzak or Adv. Tomer Weissman, co-heads of our litigation department.
+97237770100 
