| Activism Series

Israeli District Court is shareholder friendly: Enjoins a dilutive offering by directors during a proxy campaign

by | Aug 13, 2019


  • Israeli Companies Law is generally considered shareholder friendly.
  • Joseph Payne’s victory in blocking the attempt of the Board of Arcturus Therapeutics to dilute shares by 24.5% before the EGM date is a perfect example of shareholder-friendly laws in Israel.


  • Arcturus Therapeutics, an Israeli company, is engaged in pre-clinical drug delivery and nucleic acid medicines. The company is traded on the Nasdaq.
  • Joseph Payne is the founder and largest shareholder (owns 13.7%) of the company.
  • Payne was terminated as CEO in February 2018.
  • Within a few weeks, Mr. Payne filed SC 13D and requested the Board to convene an extraordinary general meeting (EGM) to remove four directors, and appoint four of his nominees.
  • On the last business day before the record date, the Board decided to postpone the EGM indefinitely.

Dilutive issue and lawsuit

Mr. Payne filed the motion following the egregious attempt by certain directors to sell 24.9% of Arcturus’ share capital to a single purchaser at a purchase price that was more than 40% below the trading price of Arcturus common shares prior to the termination of Mr. Payne.

Israeli court prevents Board’s attempt to dilute shareholders

In May 02, 2018, Mr. Payne announced that the Israeli court enjoined the attempt of the Arcturus Board of Directors to undertake a highly dilutive equity financing. 

Key points from the press release:

  • The Court expressed concern that the board’s decision to sell shares was not being undertaken to raise necessary working capital in light of Arcturus’ recent claim to have enough cash to fund operations for two years. 
  • The Court acknowledged that it was reasonable for Mr. Payne and other shareholders to be concerned that the proposed stock issuance and its timing and conditions were motivated by the board’s personal interests, namely their desire to keep control of Arcturus. 


On May 29, 2018, the company entered into a settlement agreement with Mr. Payne. Pursuant to the agreement, four Payne-backed board members were appointed to the board.

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