Significant progress in the legal arrangement for the transformation of a partnership Drilling fuel The company Ltd., which is incorporated under English law and traded on the London and Tel Aviv stock exchanges. On Monday, the Tel Aviv District Court approved Delek Drilling’s request to convene a meeting of unit holders to vote on approving the move, despite the Securities Authority’s opposition.
In a decision delivered to the parties On Monday, Judge Magen Altuvia ruled that a special general meeting of the owners of the units participating in Delek Drilling will be convened within a period of not less than 35 days, for the purpose of approving the proposed arrangement, subject to sections 350 and 351 of the Companies Law, Partnerships Ordinance To the Companies Regulations.
This means, among other things, that the approval of the decision will require an ordinary majority of Delek Drilling’s holders, as well as a majority of the minority holders of Delek Drilling, ie neutralizing the vote of the controlling shareholder, Delek Group. , Which is leading the move with the goal of turning Delek Drilling into an international company traded on a major global stock exchange.
The move is intended to make Delek Drilling an accessible corporation for investment for foreign investors, who have difficulty understanding and dealing with the ways of investing in Israeli partnerships. In his decision, the judge further ruled that an application for approval of the proposed arrangement, if and to the extent approved by the owners of the participation units, will be submitted for final approval by the court.
The judge also granted the controlling shareholder’s request fuel , And stated that “the Delek Group’s right to royalties from the partnership does not need approval in the future, including after the implementation of the proposed arrangement.” The decision means that the royalty arrangement between Delek and Delek Drilling will remain unrestricted, even after its completion of becoming a joint venture Ltd., despite the Companies Law stipulating that stakeholder transactions require re-approval of minority shareholders, once every three years.
Delek Drilling is a limited partnership for gas and oil exploration, managed by the general partner of the partnership. Delek Group owns the general partner of Delek Drilling as well as 54.7% of the participation units of the limited partnership.
Delek Drilling holds 45.34% of the natural gas reservoir The Leviathan, In 30% of the natural gas reservoir Aphrodite in Cyprus, as well as in the rights to receive a royalty from the natural gas reservoirs Crocodile and Shark. Delek Drilling recently completed the sale of its remaining rights (22%) in the Tamar natural gas reservoir to the Mubdala Petroleum Company in Abu Dhabi, for $ 955 million, which were used mainly to repay debts to the bondholders (Tamar Bond and A bonds) and to pay a dividend of 100 $ 1 million to holders of participation units.
Replacement of participation units in shares of a new company
Earlier, Delek Drilling applied to the court in early May this year to convene a meeting of the holders of its participation units to approve an arrangement for a structural change. Under the proposed arrangement, the partnership’s participation units will be replaced by ordinary shares of a new company incorporated in England J), which will hold the full rights of the general partner and the limited partner in the partnership, in the manner in which the public partnership will become a wholly owned subsidiary of New Med Energy.
The proposed arrangement also stipulates that the shares of New Med will be listed for parallel trading on the Tel Aviv Stock Exchange and the London Stock Exchange. Objections were filed to convene meetings on behalf of three private investors, as well as on behalf of the Securities Authority. Among other things, the private investors argued that the outline of the proposed arrangement was illegal, and contrary to the provisions of the Partnerships Ordinance.
This contention was based on the law in the Ordinance, which states that “structural changes in a partnership shall not be permitted except within the framework of the statutory arrangements set forth in the Ordinance.” The same private investors further claimed that the owners of the participation units are not shareholders, and therefore the permanent arrangement in section 350 of the Companies Law does not apply to them.
The Securities Authority also objected to the request, also claiming that the Partnerships Ordinance does not allow for an arrangement between the partnership and its unit holders. On another particular corporation, and this in accordance with the approval of the Minister of Justice.
So in effect, to the extent that the partnership seeks to carry out the proposed arrangement, it must apply to the Minister of Justice and request an appropriate order. In addition, the Authority argued that the transformation of the Delek Drilling Partnership into a company could not be approved, and at the same time stipulate that its royalty arrangement with the controlling shareholder, Delek Group, would remain unchanged and without having to be re-approved at the New Med shareholders meeting every three years.
Delek Group, for its part, claimed that it would not agree to an arrangement in which there was a fear of infringing on its property rights, ie that it would infringe on its rights to receive royalties from Delek Drilling. According to Delek Group, its royalty rights derive from a 1993 rights transfer agreement entered into near the partnership incorporation, under which Delek Group transferred to the partnership rights in its oil licenses.
The Securities Authority is studying the meanings of the ruling
In his decision, Justice Altuvia rejected the objections of the Securities Authority and the three private investors, and approved the convening of the meeting and the determination of the royalty agreements between Delek Drilling and the Delek Group. Public limited partnership, to the norms set forth in the Companies Law. This is in order to expand and update the mechanisms of corporate governance and ensure adequate protection for the public who own the participation units. “
According to the judge’s decision, sections 350 and 351 of the Companies Law do not explicitly exclude the application of the law even to a public limited partnership. In addition, the judge states that the court is authorized to discuss the implementation of arrangements under these sections even in the case of a public limited partnership, by virtue of its authority inherent in section 75 of the Courts Law.
As for the Securities Authority’s claim that an order of the Minister of Justice is required, the judge writes that as long as the legislature did not rule out the possibility of applying the permanent arrangement in the Companies Law to a public limited partnership, section 351 of the law does not deny the court jurisdiction.
With regard to royalties, the judge noted that according to the explanatory memorandum to the Companies Law (which stipulated that agreements with stakeholders should be approved once every three years), and according to previously established case law, the provisions of the Partnerships Ordinance or the Companies Law do not change the parties’ rights in the transfer agreement. The rights signed between Delek Group and Delek Drilling. “This is a finished act and so it was determined,” Judge Altuvia wrote.
The Securities Authority has already begun studying the ruling and its implications, and in the coming weeks will decide whether to file an appeal to the Supreme Court or accept the ruling.