Dear colleagues and friends,
Amendment 28 to the Israeli Companies Law-1999, which eliminates the concept of bearer shares, was published on 17 March 2016.
A bearer share is an equity security that is owned by the person holding the physical stock certificate. Ownership of bearer shares is not registered in the books of the issuing company. Therefore, it has become increasingly difficult to monitor or track transfers of bearer shares. The lack of ownership transparency has led to concerns of money laundering and tax evasion through the use of bearer shares.
The amendment conforms Israeli law to current global standards, which prohibit bearer shares, or at least have in place arrangements that provide transparency of the ownership of bearer shares, which Israel does not. As the use of bearer stocks in Israel is uncommon (in 2013 only twelve companies – six of which were active – were issuing them), it was decided that there was no need to introduce a system for identification and tracking of issuance and ownership of bearer shares. Instead, as of September 2016, the concept will be eliminated altogether, and Israeli companies will no longer be able to issue bearer shares.
Current holders of bearer shares should contact the issuing company, which must replace the bearer shares by (after being delivered the bearer share certificate) by issuing a share of equal value in the holder’s name.
This publication provides general information and should not be used or taken as legal advice for specific situations, which depend on the evaluation of precise factual circumstances.