CrowdFunding is Still Illegal In Israel Although the Recent Amendment of the Law -New Regulations Required

In a recent post we have updated that on 29.12.2015 the Israeli Knesset approved the Law for  the Promotion of Investments in High Tech Companies 2015 (hereinafter: the “Law”), authorizing privately held companies the offer the purchase of their securities, online, without the need  to file a prospectus. However, since the adoption of the Law, no regulations were enacted setting forth the procedure for approval “Proposals Mediators” and the maximal investment amounts per company and per investor.

In Administrative Petition case no. 18700-04-16 ExitValley v the Securities and Exchange Authority (in Hebrew) the Tel Aviv District Court discussed a petition made by a company operating a web site for crowd funding for entrepreneurs and corporations that are not publicly listed. The matter of the Petition was the decision of the Securities and Exchange Authority of 23.3.2016 which ordered the petitioner to stop its crowd funding activity, being contrary to law. The petitioner argued that this decision of the Authority will bring to the closure of its operations, the dismissal of employees and to the lost of all its investment. However, the Tel Aviv District Court  (Hon. Judge Ruth Ronen) upheld the decision of the Authority, and stipulated that the amendment of the Law relating to crowd funding lack any effect prior to the enactment of the necessary regulations.  

The Court held that the regulations are required for the procedure of approval and licensing of “Proposals Mediators” and the limit of the investment amount that can be obtained at the offerings per year and per investor: “These restrictions are not a formality, but they are the subject matter of the amended law”.