As we continue to help you put together the best possible team for your IPO, current or anticipated hopefully, we come to a very crucial member of the team - your lawyer. While you probably have an excellent lawyer that has helped you build your start-up from scratch, he/she may not be the best candidate to help you during your IPO. It is imperative that you use a lawyer that is highly experienced in taking companies public.
As you will see from today's column, lawyers play a critical role in the entire process, and you must utilize the very best. In doing so, you will ensure that your IPO will go smoothly and more importantly, that any legal hurdles along the way will be dealt with swiftly and will not jeopardize your offering.
The following information concerning the primary responsibilites of a lawyer in the IPO process was contributed by Aaron M. Lampert and Eran Ballan, attorneys with the firm of Naschitz, Brandes & Co., a leading Israeli law firm with extensive experience in international public offerings. In addition to advising Israeli and foreign companies on a broad variety of corporate law issues, Naschitz, Brandes & Co. has represented issuers and underwriters in numerous United States public offerings.
Compliance
The Israeli lawyers are primarily responsible for compliance with Israeli securities laws and corporate laws, for obtaining governmental approvals in Israel for the offering, for coordinating the due diligence process and for preparing the Israel-related disclosure in the prospectus.
A public offering in the United States implicates a variety of Israeli approval requirements. First and foremost is the approval required under the Israeli Securities Law. An Israeli company that goes public anywhere in the world requires either a permit or an exemption from the Israeli Securities Authority. The Israeli Securities Authority generally exempts companies going public in the United States from the Israeli registration procedure, if the securities are offered to no more than 35 Israeli residents (not including certain kinds of institutional investors). The Israeli residents to whom the offer is permitted must purchase the securities for themselves, and not with a view to distribution or resale. Israeli company counsel applies to the Securities Authority for the necessary exemption, advised the company and underwriters on compliance with the restrictions, and provides the necessary documents to the Securities Authority after the offering is completed.
Consents
Another area of responsibility for Israeli company counsel is obtaining third party consents for the offering. If the company has obtained approved enterprise benefits from the Israel Investment Center, or research and development funding from the Office of Chief Scientist, the approvals of these governmental bodies may be necessary. Depending on the location of the company's facilities in Israel, the Israel Lands Authority or other landlord may need to provide its consent for the offering. The need for additional third-party consents, such as those of banks and other lenders, needs to be analyzed by the Israeli lawyers.
Resolutions And Approvals
Apart from the above procedural issues, Israeli company counsel needs to attend to substantive Israeli law issues and United States disclosure issues. A company that goes public in the United States needs to have its Board of Directors adopt numerous resolutions relating to the offering, which need to be reviewed by Israeli company counsel. Israeli company counsel will also prepare new Articles of Association, tailored to the company's needs as a public company. Finally, the company's Israeli lawyer will coordinate the process of obtaining shareholder approvals for the offering. Shareholder approvals are almost inevitably required, not only to adopt the new Articles of Association but also because the terms of preferred shares issued prior to the offering typically require shareholder approval.
Disclosures
The disclosure required in a US prospectus involves Israeli counsel in both the drafting process and the due diligence process. A prospectus for an Israeli company must contain some information about aspects of Israeli law that an American investor might find unusual, as well as about the unique risks that are involved in investing in an Israeli company. Israeli counsel must be sensitive to the type of disclosure required and assist in its preparation. On a broader level, the company's Israeli lawyers are central to the due diligence process. They coordinate the collection and organization of the materials that form the basis for the disclosure that appears in the prospectus.
Prospectus Preparation
Preparation of a US prospectus is a team effort among the company's management, the company's lawyers, the underwriters, the underwriters' lawyers and the accountants. Israeli companies that offer securities to the public in the United States need sophisticated Israeli counsel, preferably with experience in US public offerings, in addition to US securities counsel.
Cultural Mediation
There are many other aspects of the public offering process in which Israeli company counsel plays an important role. No less important than any other role, however, is that of intermediary between the company and the other members of the team. Because of Israeli counsel's proximity to the company, and because of language and cultural nuances, the company's Israeli counsel often plays a central role in transmitting concerns between management and others, or in alerting management to signals that are being sent by other members of the team.
My thanks again to Aaron M. Lampert and Eran Ballan, attorneys with the firm of Naschitz, Brandes & Co. for contributing to Enable.
Published by Israel's Business Arena on March 28, 2000.