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The Board of Directors in the Israeli Company

Michael Decker
Michael Decker

What are the powers of the board of directors for an Israeli company? What authority does it have over the direction its company takes?

Our law office, specializing in Israeli corporate law, can advise you on all the important decisions affecting your company.

Who is the board of directors?

The board of directors administers the ongoing business of the company. Absent a clause in the bylaws stating otherwise, its directors are appointed in the annual vote of the general assembly. The board sets the company goals and ensures they are met.

Board of Directors

What are its powers?

Broadly speaking, the board of directors is responsible for determining policy the company is to follow. It also oversees the execution of the CEO’s powers.

The board of directors is authorized to do the following:

  1. Determine the company’s action plan and how it may financially bring about its realization;
  2. Oversee the financial robustness of the company and set its credit limits;
  3. Decide the organizational structure and remunerative and compensatory policies;cop
  4. Issues bond series;
  5. Compile and approves financial reports;
  6. Make reports to the annual assembly of shareholders on the status of the company its business dealings;
  7. Appoint and terminate the employment of the CEO, as well as exert his powers in the event he is prevented from doing so on his own;
  8. Approve those actions and business dealings which require its authorization in the bylaws or statute;
  9. Allocate shares not to exceed the registered share capital of the company;
  10. Make decisions concerning share allocation;
  11. Provide opinions on special acquisition bids;
  12. In public companies, the board of directors has further responsibilities. It sets the minimum number of directors who must possess financial and accounting expertise and appoints the inspectorate, oversight committee and remuneration committee.

As a rule, the board may not delegate its powers to the CEO.

Voting and adopting resolutions of the board

Unless otherwise provided for in the bylaws, each director will be entitled to a single vote on board resolutions which will be adopted through a simple majority. In the event of a split vote, the chairman of the board will cast the deciding vote.

It is incumbent on a director to use his discretion in how he votes and he may not be party to any voting pact. Violation of this provision will be akin to the director deviating from his fiduciary responsibilities.

Can a single person be a director?

A single individual or a corporation may serve as a director in a company which is private.

When must there be outside directors?

A public company requires the appointment of two outside directors who must “belong to the public.” One of these must have financial and accounting expertise, while the other must have some type of professional expertise. Outside directors have a supervisory role to oversee the company’s activities on behalf of the public.

Independent directors

An independent director is one who meets the criteria for being appointed an outside director. There are non-binding company law guidelines providing that the majority of directors in a public company will be composed of independent directors. The guidelines add that a company in which someone has a controlling interest should ensure that at least a third of its directors are independent directors.

Stand-in directors

Absent a bylaws provision allowing this, a director may not have another appointed in his stead at board assemblies. Even with such a provision, the authority of the director for whom the appointment was made will maintain his authority. The act of appointing another director in his stead does not detract from the authority held by the director who made the appointment.

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