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Article E: External Director
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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.
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Duty to appoint |
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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.
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Qualification for appointment
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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.
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Declaration |
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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.
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Initial External Directors
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243. At least one External Director shall serve on
every committee authorized to exercise any of the powers of the board of
directors.
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Participation in committees
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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.
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Remuneration and refund of expenses
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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.
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Duration of office |
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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.
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Termination of office by general meeting
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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.
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Termination of office by court
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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.
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Appointment by special general meeting
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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.
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Prohibition against appointment and
employment
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Chapter
2: Appointment and
Dismissal of Other Office Holders >>
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