In the coming weeks, the Israeli companies traded on Wall Street will publish their extended reports (20F or 10K) summarizing the year 2022. As part of these reports, the companies are required to report material risks that may affect them. Will they now also be required to report on risks related to the legal reform?
● The big investment houses are calling for talks about the legal reform
● The Bank of Israel’s forecasts from January are no longer relevant: the interest rate will probably not stop at 4%
Attorney Max Lindenfeld, from the commercial department at Pearl Cohen’s New York office, works with several public companies from Israel and he says that he receives quite a few questions from clients on this subject, and he estimates that in the end it is likely that Israeli companies that trade in the US will have to report to this extent differently in the reports on the impact of the reform, although at this stage he suggests that companies wait and see what the legislation will look like and how it will affect.
“Our customers are definitely asking questions. Our answer is to wait and see what will happen in practice, what the legislation will look like, and also what other companies are doing. Of course, it also depends on how fundamental it is to the company – how much it will really affect the company. It may be that some companies will have a substantial impact and some Less. For example, companies that record revenues in shekels are likely to be affected more than companies whose revenues are in dollars,” says Lindenfeld.
Attorney Max Lindenfeld / Photo: Niki Westpel
According to him, the companies traded on Wall Street are required to report in their extended report on the risks, and some of the risks they report on include the risk of operating in Israel – for example, companies state that Israeli workers are sometimes called up for reserve service, or on the exchange rates. One of the reported risks may be the impact of legal reform. Another situation is that companies take money out of the country due to the fear of the effects of the reform – which may lead to financing difficulties in the end, and is also very relevant to the shekel-dollar exchange rate.
Besides the disclosure of the risks, Lindenfeld points out that the issue of reform can enter other sections in the expanded report: the section where companies report on the regulation that affects them and, to a lesser extent, the taxation section as well.
“I have examined the reports of companies and so far, I have not seen any reference to the subject in any of the sections. I estimate that they will report when the legislation is passed,” he notes. However, it should be noted that at this stage most of the Israeli companies have not yet published their extended reports, and most of them will do so next month.
In your opinion, is there a chance that the SEC (Securities Authority of the USA) will require Israeli companies to disclose the effects of the legal reform?
“I don’t think the SEC will require it. Of course, if the impact on them is substantial, they are required to report according to the law.”