Israel Company Law 1999

Article B: Restrictions on Appointment and Termination of Office

225. A person who is a candidate to hold office as a director shall disclose to the person appointing him whether he has been convicted by a conclusive judgment of an offense referred to in section 226, where five years have not yet elapsed from the date of the judgment by which he was convicted.

Duty of disclosure

226. (a) A person convicted by a conclusive judgment of one of the following offenses shall not hold office as a director in a public company unless five years have passed since the date on which the judgment by which he was convicted was given:

1) offenses under sections 290 to 297, 392, 415, 418 to 420

and 422 of the Penal Law, 1977, and under sections 52C, 52D, 53(a) and 54 of the Securities Law;

2) conviction by a court outside Israel of the offenses of bribery, deceit, offenses by managers of a corporate body or offenses involving misuse of inside information;

3) conviction of any other offense in respect of which a court holds that, due to the substance, gravity or circumstances of such offense, such person is not fit to serve as director in a public company.

(b) The court may determine, at the date of the conviction or thereafter, on the application of a person interested in being appointed as a director, that despite his conviction of offenses as laid down in subsections (a)(1) and (a)(2), and taking into account, inter alia, the circumstances in which the offense took place, such person is not precluded from holding office as director of a public company.

(c) The Minister may prescribe additional offenses to those laid down in subsection (a)(1).

Restriction on appointment due to conviction

227. (a) A person who has been declared bankrupt shall not be appointed as director for so long as such person remains discharged, nor shall a corporation that has resolved to enter into voluntary liquidation or in respect of which a winding up order has been issued.

(b) A person nominated to hold office as director to whom the provisions of subsection (a) apply shall disclose such to the person appointing him.

Limitation on appointment due to bankruptcy or liquidation

228. (a) Without derogating from the provisions of any law, the office of a director shall terminate before the end of the period of office for which he was appointed, in any of the following instances:

1) he resigns or is dismissed from office as provided in sections 229 to 231;

2) he is convicted of an offense referred to in section 232;

3) in accordance with a court ruling as provided in section 233;

4) he has been declared bankrupt, or if a corporation, it has been resolved to liquidate the corporation voluntarily, or a winding up order has been issued in respect thereof.

(b) A company may not stipulate conditions in its articles of association regarding the provisions of this section, but it may add additional causes for termination of the office of a director.

Termination of office

229. (a) A director may resign from office by delivery of a notice to the board of directors, to the chairman of the board of directors or to the company, and the resignation shall take effect on the date of delivery of the notice, unless a later date is set out in the notice.

(b) A director shall give reasons for his resignation.

(c) Where notice of the resignation of a director is received, the fact of the resignation and the reasons given therefor shall be presented to the board of directors and shall be recorded in the minutes of the first meeting convened after the resignation.

Resignation of director

230. (a) The general meeting may, at any time, dismiss a director unless otherwise provided in the articles of association, provided that the director shall be given the opportunity to put his case before the general meeting.

(b) Where the articles of association contain a provision whereby a director may be appointed to hold office otherwise than by the general meeting, such person may only be removed from office by the person entitled to appoint him and in the manner prescribed for such in the articles of association, unless otherwise provided in the articles of association.

Dismissal of director

231. Where a company becomes aware that a director was appointed contrary to the provisions of section 226 or 227(a), or that a director committed a breach of the provisions of section 225, 227(b) or 232, the board of directors shall resolve, at its first meeting convened after becoming so aware, to terminate the office of such director, if it finds that the said conditions are fulfilled, and such office shall expire on the date of such resolution.

Obligation to cease holding office

232. Where a director has been convicted by a final judgment of an offense provided in section 226(a)(1) or (3), he shall so inform the company and his office shall terminate on the date of giving of such notice, and in a public company, it shall not be possible to reappoint him to hold office as a director unless five years have passed as provided in section 226.

Termination of office due to offense

233. The court may, on the application of the company, a director, shareholder or creditor, order the termination of the office of a director if it is finds that one of the following prevails:

(1) the director is permanently unable to fulfil his function;

(2) in respect of a director acting in a public company – during the term of his office he was found guilty in a court outside Israel of offenses referred to in section 226(a)(2).

Disqualification pursuant to court ruling

234. A director who commits a breach of the duty of disclosure provided in sections 225, 227(b) or 232 shall be considered as having committed a breach of his fiduciary duty to the company.

Fiduciary duty