Introduction: A Market Defined by Resilience and Duality

Any account of shareholders’ rights in Israel over the past two years must begin with a paradox. Against the backdrop of the war that began on 7 October 2023, a divisive debate over judicial reform and three sovereign credit downgrades, Israel’s capital markets did not merely endure – they surged to record highs. Through 19 December 2025, the Tel Aviv Stock Exchange (TASE) TA-35 index rose 53%, the TA-125 climbed 52% and the TA-90 gained roughly 46%, outperforming global peers; since the war began, the TA-35 has leapt by about 100% and the TA-90 by around 93%. This resilience is the essential context for everything that follows.

For practitioners advising on shareholder rights and activism, Israel is best understood as a market with two faces. The first is domestic: companies incorporated and listed in Tel Aviv, governed by the Israeli Companies Law, 5759-1999 and the Israeli Securities Law, 5728-1968, and supervised by the Israel Securities Authority (ISA). The second is cross-border: the unusually large population of Israeli companies listed on Nasdaq and the New York Stock Exchange (NYSE), mostly as “foreign private issuers” (FPIs), whose securities trade in the US but which retain Israeli corporate law as their governance backbone. The interplay between the two regimes is where the most distinctive shareholder-rights questions arise, and where the most consequential activism of the last two years has played out.

The Israeli Market in 2024–26: Records Amid Turmoil

The rebound extended to the primary market: 17 companies completed IPOs on TASE in the first nine months of 2025, raising ILS3.8 billion, against five IPOs raising ILS0.8 billion in all of 2024. Equity market capitalisation reached roughly ILS1.7 trillion by mid-2025, 21% higher than at year-end 2024. Retail participation, historically thin, expanded sharply: Israeli retail investors bought some ILS13.7 billion of shares in 2025, while foreign investors returned as net buyers of roughly ILS4.3 billion, mainly in financials and defence.

The exchange has courted this momentum with reforms designed to attract global investors. The most significant is the shift, effective 5 January 2026, from a Sunday-to-Thursday trading week to a Monday-to-Friday schedule, aligning TASE with global markets and removing a longstanding barrier to international participation. TASE has also expanded its indices, launching in early 2026 a TA-Technology 35 index modelled on the Nasdaq 100 and intended as a home for leading technology companies dual-listed abroad.

The macro backdrop remained volatile. All three major rating agencies downgraded Israel during the war; Moody’s cut twice in 2024, ultimately to Baa1 with a negative outlook, the lowest investment-grade rating it had ever assigned the country. By early 2026 it had returned the outlook to stable, citing economic resilience and a strong high-tech sector.

The judicial-reform controversy of 2023 – which triggered mass protests and investor warnings about institutional quality – has receded from the headlines but not disappeared: the effort continued in modified form into 2025, with a bill changing the composition of the Judicial Selection Committee and a constitutional challenge before an expanded Supreme Court panel expected in 2026. Its legacy for corporate governance is heightened investor sensitivity to the quality and predictability of the courts that adjudicate shareholder disputes.

Disclosure Implications of War and Geopolitics

For public companies, domestic and US-listed alike, the war reshaped disclosure practice. Risk-factor sections now routinely address the operational consequences of armed conflict: reserve-duty call-ups, supply-chain and logistics disruption, insurance limitations, and the potential for boycotts or sanctions. For Israeli FPIs filing on Form 20-F, the challenge is to calibrate that disclosure to a US investor audience without understating genuine exposure or reflexively over-disclosing. Materiality assessments have become more dynamic, and boards must weigh how security developments intersect with guidance.

Governance-Easing Reforms and the Dual-Class Debate

A clear regulatory trend has been the easing of governance burdens to encourage listings and reduce friction for companies caught between two legal systems. A March 2024 amendment to the Companies Regulations (Reliefs for Israeli Public Companies Listed on Stock Exchanges Outside of Israel) relaxed requirements for Israeli companies traded on recognised foreign exchanges, including dual-listed companies: exemption from certain Israeli proxy-card requirements, reduced reporting to the Israeli Companies Registrar and – importantly for activism – an increase to 5% in the threshold to submit a shareholder proposal for the election or removal of a director, with a 10% threshold to convene an extraordinary general meeting.

The ISA has pursued a parallel agenda. In February 2025, its Chairman appointed a committee to review periodic and immediate disclosure requirements with an eye to simplification. It has also advanced frameworks for securitisation and money-market competition, and a bill transferring supervision of non-bank brokers to the ISA along MiFID II lines.

The most consequential structural debate concerns dual-class share structures. TASE has historically operated under a strict one-share-one-vote norm, and the dual-listing framework itself requires that a company have only one type of share in its issued capital. As Israel seeks to lure home the technology companies that have overwhelmingly chosen Nasdaq, where multi-class founder-control structures are commonplace, pressure has grown to permit differential voting rights for TASE listings. Such structures may attract founders wary of losing control, but they cut against the minority-protection philosophy of Israeli corporate law. Whether TASE can compete for Israeli tech listings may turn on how the debate resolves.

Minority Shareholder Protection: The Architecture and Its Evolution

Israeli corporate law is, at its core, built around the protection of minority shareholders in companies with concentrated ownership. A significant portion of TASE-listed companies have a controlling shareholder holding at least 25% of share capital, and the law’s central mechanisms respond to that reality.

The cornerstone is the special-majority approval regime for related-party and controlling-shareholder transactions. Transactions in which a controlling-shareholder has a personal interest – and certain executive-compensation arrangements – must clear a “majority of the minority”: approval by a majority of disinterested shareholders voting, with the controlling shareholder’s votes stripped out. This effectively transfers decision-making authority to minority holders (including shareholders among the institutional bodies). A second pillar is the mandatory role of external and independent directors, who must populate audit and compensation committees and are central to the integrity of any conflicted transaction.

Israeli courts – principally the Economic Department of the Tel-Aviv District Court, a specialised bench for corporate and securities disputes – have developed a rich body of law on the duty of fairness owed by controlling shareholders and on directors’ and officers’ fiduciary duties. A defining recent development is the Supreme Court’s ruling in the litigation arising from the Nestlé–Osem going-private merger. Where negotiations are conducted independently through a special committee of external and independent directors, and the transaction is approved by the audit committee, the board and a disinterested special majority of shareholders, the Court held, a rebuttable presumption of fairness arises and review proceeds under the deferential business-judgment rule rather than entire-fairness-style scrutiny. The Delaware-influenced move rewards robust process and raises the bar for plaintiffs attacking conflicted deals.

On appraisal and squeeze-outs, Israeli law continues to channel takeovers through structures that protect minorities. A full tender offer requires acceptance by holders of 95% of the target’s shares to force out a dissenting minority, and dissenting holders retain the right to petition the court for a fair-value determination within six months. Amendment 16 to the Companies Law permits an acquirer to specify that shareholders who tender forfeit appraisal rights, confining pricing uncertainty at most to the 5% who did not. Separately, the acquisition of a controlling stake – 25% or 45% of voting rights – triggers the requirement to launch a special tender offer or obtain shareholder approval as an exceptional private placement, significantly limiting an acquirer’s ability to accumulate shares through open-market purchases.

Derivative and class actions remain active tools before the Economic Department, and lawsuits against directors and officers have increased markedly, with the scope of their potential liability broadening. The consequences are real: sharper board attention to process, an elevated role for D&O insurance, and credible litigation leverage for minority shareholders.

Pending Reform: Amendment 37 and Companies Without a Control Core

A structural shift is underway in Israeli ownership patterns: a growing cohort of public companies lacks a controlling shareholder, and Israeli law, designed for controlled companies, fits these “dispersed ownership” companies imperfectly. Proposed Amendment No 37 to the Companies Law responds directly. In April 2025, the Knesset’s Constitution, Law and Justice Committee approved a bill to strengthen governance in such companies. Perhaps most significantly, the amendment would lower the quantitative control threshold from 50% to 25%, aligning the statutory definition with the ISA’s de facto position, which already applies controlling-shareholder duties to holders of 25% or even less. The bill also requires a majority of independent directors (currently only a recommendation), replaces the traditional requirement of two external directors with the majority-independent model, and scrutinises directors’ mutual affiliations more closely. For minority investors in non-controlled companies – where the classic agency problem is weak boards and entrenched management rather than a dominant owner – this is a meaningful recalibration.

Institutional Investors and Proxy Advisers: A Maturing Governance Force

The most important domestic governance development of the past decade is the rise of Israeli institutional investors – large insurers and asset managers such as Phoenix, Migdal, Clal, Harel, Menora, Altshuler Shaham and Meitav – as an active constituency. Because so many conflicted transactions and compensation decisions require majority-of-the-minority approval, and because these institutions hold the decisive minority stakes, their voting behaviour frequently determines outcomes – leverage their Anglo-American counterparts often lack.

That leverage is amplified by Israel’s distinctive binding say-on-pay regime. Introduced in 2012 through Amendment 20 to the Companies Law, it requires a binding dual-majority vote on executive compensation policy and on the pay of controlling-shareholder executives – meaning shareholders can block, not merely advise on, CEO pay. The law does permit the board to override a shareholder rejection under certain conditions, but in practice this bypass mechanism has fallen into disuse: market and reputational pressure has made boards reluctant to invoke it, reinforcing the de facto veto power of minority shareholders. That authority stands out globally and regularly produces genuine contests over pay policy.

Proxy advice, by contrast, has undergone a structural transformation. For over a decade, a single domestic adviser, Entropy, guided the voting of most Israeli institutions – a concentration of influence that drew regulatory fire: the Capital Market, Insurance and Savings Authority published a sharply critical audit of its conflicts of interest and required institutions to base their votes on independent in-house analysis. Entropy exited the voting-advisory field and reinvented itself as a governance consultancy and ESG ratings provider. The large institutions now run their own voting and governance research functions, although a specialist firm has since emerged to advise institutional investors and facilitate engagement between companies and institutions on agenda items ahead of shareholder meetings. The regulator, meanwhile, remains vigilant: in August 2026 it demanded detailed records of three years of institutional voting.

For Israeli companies listed in the US, the picture is different. ISS and Glass Lewis carry substantial weight with those companies’ global institutional base, and both maintain Israel-specific voting guidelines. Their influence was on vivid display in the Nano Dimension contest, where ISS, Glass Lewis and Egan-Jones all backed the activist’s case for board change at the requisitioned special meeting in March 2023 and again at the annual meeting in December 2024.

On ESG, the Israeli picture mirrors the global recalibration. The ISA has encouraged, but not mandated, ESG and corporate-responsibility disclosure, publishing a recommended reporting outline and, in September 2024, audit findings identifying widespread deficiencies in how companies identify, rank and quantify environmental risks. TASE has introduced ESG-oriented indices. But mandatory, ISSB-aligned climate reporting has not been adopted, and commentators continue to urge alignment with the EU’s CSRD and the ISSB standards.

Shareholder Activism: The Israeli Toolkit

Activism against Israeli companies is shaped decisively by a company law that hands activists tools differing markedly from the Delaware playbook. The most powerful is the statutory right of shareholders holding as little as 5% of voting rights to requisition a special general meeting, at any time, and to place items on the agenda, including the removal of directors and the nomination of their own candidates. Where a Delaware activist must typically wait for the annual meeting or navigate a board-controlled special-meeting process, a 5% holder in an Israeli company can force the question. (For Israeli companies listed abroad, the 2024 relief regulations raised this to 10% in certain cases.)

Equally important is what Israeli law lacks. There is no Delaware-style poison pill embedded in Israeli corporate law, and directors’ ability to deploy defensive measures is constrained by their fiduciary duties and by the courts’ willingness to scrutinise entrenchment. Staggered boards exist but can be attacked, and shareholders’ statutory rights to convene meetings and remove directors limit the durability of structural defences. The result is an environment more accommodating to activists than Delaware – a fact not widely appreciated outside Israel.

The Murchinson–Nano Dimension Saga: A Case Study in Cross-Border Activism

No episode better illustrates the collision of Israeli company law and US market dynamics than the campaign by Toronto-based Murchinson Ltd. against Nano Dimension Ltd. (Nasdaq: NNDM), an Israeli-incorporated additive-manufacturing company. Murchinson, holding roughly 7.1% of Nano’s shares, exercised the Israeli 5% right to requisition a special general meeting in early 2023 to remove directors, including CEO and chairman Yoav Stern. Nano’s board resisted, adopting a poison pill in January 2023 and suing in Israel for a declaration that the meeting was invalid – arguing, strikingly, that holders of American Depositary Shares had no right to vote.

The dispute became a test of shareholder democracy under Israeli law. In November 2024, the District Court fully validated the results of the March 2023 special meeting, at which shareholders had overwhelmingly (by Murchinson’s account, at least 92% of votes cast) approved amendments to the articles allowing shareholders to fill board vacancies and remove directors by simple majority at any meeting. The decision reverberated beyond Nano, drawing public comment from Stratasys, itself the target of a related Nano takeover effort.

The saga entangled a wave of M&A: under Stern, Nano pursued the acquisitions of Desktop Metal (NYSE: DM) and Markforged (NYSE: MKFG). Both closed in 2025 – Desktop Metal on 2 April for roughly USD179 million and Markforged on 25 April for roughly USD116 million – but only after litigation, including a suit by Desktop Metal alleging that Nano had failed to use reasonable best efforts to close, and a wholesale change of leadership in December 2024. Desktop Metal was later placed into bankruptcy and deconsolidated, an epilogue to an acquisition spree activists had criticised.

A second phase showcased the cross-border interplay in detail. In early 2026, after Oramed built a stake, Nano’s new board adopted a fresh rights agreement with a 9.99% trigger. In February 2026, Murchinson sued in Israel to establish its right to join with other shareholders in requisitioning an extraordinary general meeting under Section 63 of the Companies Law without triggering the pill; in April 2026 the court granted a temporary injunction conditioned on a ILS250,000 deposit, and Nano sought leave to appeal to the Supreme Court. Murchinson’s 2026 proposals sought to declassify the board, to bar adoption of a poison pill without shareholder approval within 90 days, and to remove and replace directors. The contest resolved in July 2026 through a settlement: the meeting was cancelled, four incumbent directors resigned and three Murchinson nominees joined the board, one becoming interim CEO. The episode is a near-complete catalogue of the Israeli activist toolkit – the 5% requisition right (which, as noted, was later raised to 10% for foreign-listed companies), board removal by simple majority, litigation in the Economic Department and on appeal, the contested legitimacy of a poison pill, and negotiated board reconstitution.

Other Campaigns and Defensive Responses

Activism has touched other Israeli issuers. Perion Network Ltd. (Nasdaq and TASE: PERI), an Israeli advertising-technology company, adopted a limited-duration shareholder rights plan in April 2025 with an unusual 13% trigger – a reminder that Israeli-incorporated, US-listed companies increasingly reach for pill-style defences even though Israeli law provides no ready-made pill and such measures may be vulnerable to challenge. Earlier campaigns, such as Starboard Value’s 2022 engagement with Wix.com, show that US activists have long regarded the Israeli tech cohort as fair game. Globally, activism set records in 2025 – a trend from which Israeli issuers are not insulated.

The Cross-Border Dimension: FPIs, US Rules, and Israeli Law

For Israeli companies listed on Nasdaq and NYSE as foreign private issuers, activism sits at the intersection of two regimes, and several US-specific features shape the contest.

First, FPIs are exempt from the US proxy solicitation rules under Exchange Act Rule 3a12-3(b), and therefore from the SEC’s universal proxy card requirement (Rule 14a-19), which applies to contested director elections at domestic issuers held after 31 August 2022. In a contest at an Israeli FPI, each side runs its own proxy card in the traditional bifurcated fashion, and the mechanics are governed principally by the Israeli Companies Law. This is why the Israeli 10% special-meeting right, not a US-style advance-notice bylaw, is typically the activist’s point of entry.

Second, activists in FPIs remain subject to the SEC’s beneficial-ownership reporting regime, tightened effective in 2024: the deadline for an initial Schedule 13D was shortened from ten calendar days to five business days, amendments must be filed within two business days of a material change, and revised Schedule 13G deadlines were phased in from 30 September 2024. These deadlines compress the window in which a position can be built quietly.

Third, a significant change looms for FPI insiders. The National Defense Authorization Act for Fiscal Year 2026, signed on 18 December 2025, includes Section 8103, the “Holding Foreign Insiders Accountable Act”, abolishing the exemption under Rule 3a12-3 that had shielded FPI insiders from Section 16(a) beneficial-ownership reporting. Effective 18 March 2026, directors and officers of FPIs with equity registered under the Exchange Act must file Forms 3, 4 and 5 substantially as domestic-issuer insiders do. The change is narrower than sometimes reported: it does not reach 10% beneficial owners, and FPI insiders remain exempt from Section 16(b) short-swing profit recovery and Section 16(c) short-sale prohibitions. The effect is greater transparency into insider trading – a factor activists will exploit.

Fourth, the SEC has reopened the foundational question of who qualifies as an FPI at all. On 4 June 2025, the Commission published a Concept Release on Foreign Private Issuer Eligibility, prompted by a staff study showing that the FPI population has shifted dramatically since the definition was last revised, with a majority now trading predominantly in US markets. The release, with comments due 8 September 2025, floats options ranging from a foreign-trading-volume test to a major-foreign-listing requirement to an assessment of home-country regulatory quality. For Israel this is serious: many Israeli FPIs trade predominantly or exclusively in the US, and a tightened definition could strip them of FPI accommodations. Tellingly, the ISA filed a comment letter emphasising the quality of Israeli disclosure and governance regulation and the robustness of the dual-listing framework – an implicit argument for preserving FPI status for Israeli issuers.

Finally, cross-border M&A activism must reckon with Israeli merger mechanics. Because acquisitions of Israeli public companies typically proceed by reverse triangular merger requiring a 75% special majority, and because full tender offers require 95% acceptance with residual appraisal rights, activists opposing or agitating for a deal have choke points that do not exist in Delaware. Court-approved arrangements under Section 350 of the Companies Law provide a further route for complex restructurings and schemes.

Conclusion: The Year Ahead

The overarching lesson of 2024–26 is that Israel’s shareholder-rights landscape has grown more sophisticated, more contested and more consequential, even as the country absorbed extraordinary external shocks. Record markets and a wave of governance reform, from the trading-week change to Amendment 37, are reshaping the domestic environment; institutional investors have matured into a decisive force, empowered by the majority-of-the-minority and binding say-on-pay architecture; and activism – powered by the 5% special-meeting right and the absence of Delaware-style defences – has proven that Israeli Company Law can be a formidable instrument of shareholder change.

For the cross-border cohort, the coming year will be defined by three watch items: whether the SEC narrows the FPI definition in a way that captures a swath of Israeli issuers; how boards and activists adapt to the end of the FPI Section 16(a) exemption; and whether TASE’s push to attract technology listings forces a reckoning with dual-class structures. Running through all of them is the tension between a corporate law engineered to protect minorities and the ambitions of founders and companies operating in a global, US-centred capital market. Navigating it, in Tel Aviv and on Nasdaq alike, will remain the central task for shareholders and their advisers in the year ahead.