Incredimail 2013 Annual Report Download - page 26

We are subject to ongoing costs and risks associated with complying with extensive corporate governance and disclosure requirements.
As an Israeli public company, we incur significant legal, accounting and other expenses. We incur costs associated with our public
company reporting requirements as well as costs associated with corporate governance and public disclosure requirements, including
requirements under the Sarbanes-Oxley Act of 2002, the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010, the Listing
Rules of the NASDAQ Stock Market, regulations of the SEC, the provisions of the Israeli Securities Law that apply to dual listed companies
(companies that are listed on the Tel Aviv Stock Exchange ("TASE") and another recognized stock exchange located outside of Israel) and the
provisions of the Israeli Companies Law 5759-
1999 (the "Companies Law") that apply to us. For example, as a public company, we have created
additional board committees and are required to have at least two external directors, pursuant to the Companies Law. We have also contracted an
internal auditor and a consultant for implementation of and compliance with the requirements under the Sarbanes-
Oxley Act. Section 404 of the
Sarbanes-
Oxley Act requires an annual review and evaluation of our internal control over financial reporting of the effectiveness of these
controls by our management. There is no guarantee that these efforts will result in management assurance that our internal control over financial
reporting is adequate in future periods. In connection with our compliance with Section 404 and the other applicable provisions of the Sarbanes-
Oxley Act, our management and other personnel devote a substantial amount of time, and we may need to hire additional accounting and
financial staff, to assure that we continue to comply with these requirements. The additional management attention and costs relating to
compliance with the foregoing requirements could materially and adversely affect our financial results. See "Item 5 Operating and Financial
Review and Prospects — Overview —
General and Administrative Expenses" for a discussion of our increased expenses as a result of being a
public company.
If we were not considered a foreign private issuer status under U.S. federal securities laws, we would incur additional expenses
associated with compliance with the U.S. securities laws applicable to U.S. domestic issuers.
We are a foreign private issuer, as such term is defined under U.S. federal securities laws, and, therefore, we are not required to comply
with all of the periodic disclosure and current reporting requirements applicable to U.S. domestic issuers. If we did not have this status, we
would be required to comply with the reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and
extensive than the requirements for foreign private issuers. The regulatory and compliance costs to us under U.S. securities laws, if we are
required to comply with the reporting requirements applicable to a U.S. domestic issuer, may be significantly higher than the cost we currently
incur as a foreign private issuer.
The rights and responsibilities of our shareholders are governed by Israeli law and differ in some respects from the rights and
responsibilities of shareholders under U.S. law.
We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our
memorandum of association, articles of association and by Israeli law. These rights and responsibilities differ in some respects from the rights
and responsibilities of shareholders in typical U.S. corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith
in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders and to refrain from abusing his
power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. Israeli law provides
that these duties are applicable in shareholder votes at the general meeting with respect to, among other things, amendments to a company’
s
articles of association, increases in a company’
s authorized share capital, mergers and actions and transactions involving interests of officers,
directors or other interested parties which require shareholders’
approval. There is little case law available to assist in understanding the
implications of these provisions that govern shareholder behavior.
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