Incredimail 2014 Annual Report Download - page 29

We are subject to ongoing costs and risks associated with complying with extensive corporate governance and disclosure requirements.
We were unable to perform an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2014.
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 assessment by our management of our internal control over financial reporting of the effectiveness of
these controls as of year-
end. As described below in Item 15, this annual report does not include an annual report of management's assessment of
our internal control over financial reporting. Although we plan to initiate our management assessment of our internal control over financial
reporting for 2015, there is no guarantee that these efforts will result in management assurance that our internal control over financial reporting is
adequate. In connection with our efforts to comply 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 have hired, and may need to hire, additional accounting and
financial staff to assure that we 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 or
her 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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