Article E: External Director | |
239. (a) Two External Directors shall hold office in a public company. (b) The External Directors shall be appointed by the general meeting, provided that one of the following conditions prevails: 1) in counting the votes of the majority at the general meeting at least one-third of all the votes of shareholders who are not holders of control in the company or representatives of such persons, present at the time of voting are included; in counting the total votes of such shareholders, abstentions shall not be taken into account; 2) the total number of votes opposing the appointment from among the shareholders referred to in paragraph (1) shall be no greater than one percent of the total voting rights in the company. (c) The Minister may prescribe different rates from the rate provided in subsection (b)(2). (d) In a company in which, on the date of appointment of an External Director, all members of the board of directors of the company are of one gender, the External Director appointed shall be of the other gender. | Duty to appoint |
240. (a) An individual who is a resident of Israel and who is qualified for appointment as a director may be appointed as an External Director. (b) An individual who himself, or whose relative, partner, employer or a corporation in which he has control, has a connection with the company or with a holder of control of the company on the date of appointment, or to another body corporate shall not be appointed as an External Director; for purposes of this subsection: “connection” – the existence of labor relations, business or professional relations generally or control, as well as acting as an office holder, other than as a director for a period of no more than three months during which the company first offered its shares to the public; “other body corporate” – a body corporate in which the holder of control is, on the date of appointment or during the two years preceding the date of appointment, the company or a holder of control therein. (c) An individual shall not be appointed as an External Director if any other position or business of his might give rise to a conflict of interest with his role as director, or if these might harm his ability to act as a director. (d) A director of a company shall not be appointed as an External Director of another company if at such time, a director of the other company is acting as an External Director of the first company. (e) An individual shall not be appointed as an External Director if he is a member of the Securities Authority or an employee thereof or if he is a member of the board of directors of a stock exchange in Israel or an employee thereof. | Qualification for appointment |
241. (a) A general meeting at which the appointment of an External Director is on the agenda may only be convened if the nominee has declared that he fulfils the conditions required for being appointed as an External Director (hereinafter “the declaration”). (b) The declaration shall be kept at the registered office of the company and shall be open for inspection by any person. (c) The Minister may lay down provisions regarding the declaration. | Declaration |
242. Initial External Directors shall be appointed by general meeting to be convened no later than three months from the date on which the company became a public company. | Initial External Directors |
243. At least one External Director shall serve on every committee authorized to exercise any of the powers of the board of directors. | Participation in committees |
244. (a) An External Director is entitled to remuneration and to a refund of expenses as may be prescribed by the Minister upon consultation with the Securities Authority. (b) An External Director shall not receive, in addition to the remuneration to which he is entitled and refund of expenses, any other consideration, direct or indirect, for acting as a director of the company; for the purposes of this subsection, consideration shall not include the grant of an exemption, an undertaking to indemnify, indemnification or insurance pursuant to the provisions of Article C of Chapter 3. | Remuneration and refund of expenses |
245. (a) The term of office of an External Director shall be three years, and the company may, notwithstanding the provisions of section 240, appoint him for one further term of three years. (b) An External Director shall only be dismissed in accordance with the provisions of sections 233, 246 and 247. | Duration of office |
246. (a) Where the board of directors becomes aware that there is a suspicion that an External Director has ceased to fulfil one of the conditions required under this Law for his appointment as an External Director, or that there is a suspicion that the director has committed a breach of a fiduciary duty to the company, the board of directors shall discuss such matter at the first meeting to be convened after becoming so aware. (b) Where the board of directors finds that the External Director has ceased to fulfill one of the conditions required under this Law for his appointment or that he has committed a breach of his fiduciary duty, the board of directors shall convene a special general meeting on the agenda of which shall be the termination of office of the External Director. (c) The reasons for the finding of the board of directors shall be presented to the special general meeting and the External Director shall be given a reasonable opportunity to express his position; the resolution of the special general meeting regarding the termination of the office of the External Director shall be passed by the same majority as is required for his appointment. | Termination of office by general meeting |
247. The court may, on the application of a director or a shareholder, order the termination of the office of an External Director if it is of the opinion that he has ceased to fulfil one of the conditions required under this Law for his appointment as an External Director or that he has committed a breach of a fiduciary duty to the company. | Termination of office by court |
248. Where the position of External Director becomes vacant and there are not two other External Directors serving in the company, the board of directors shall convene a special general meeting, for the earliest date possible, on the agenda of which shall be the appointment of an External Director. | Appointment by special general meeting |
249. A company shall not appoint a person who has served as External Director of the company as an office holder of the company, shall not hire such person as an employee and shall not receive professional services from such person in return for payment, whether directly or indirectly, including by way of a corporate body controlled by such person, unless two years have elapsed from the termination of his office as External Director of such company. | Prohibition against appointment and employment |
Chapter 2: Appointment and Dismissal of Other Office Holders >> |
