Incredimail 2010 Annual Report Download - page 22

Effective April 1, 2005, the Investment Law was amended. As a result, the criteria for investments qualified to receive tax benefits as an
Approved Enterprise were revised (the “First Amendment”).
As will be elaborated below, the Israeli Parliament approved recently an additional
amendment to the Investment Law, which revises again the criteria for investments qualified to receive tax benefits as a “Preferred Enterprise”
for new tax benefits programs from January 1, 2011 (the “Second Amendment”).
No assurance can be given that we will, in the future, be
eligible to receive additional tax benefits under this law and its amendments. The termination or reduction of these tax benefits would increase
our tax liability in the future, which would reduce our profits or increase our losses. Additionally, if we increase our activities outside of Israel,
for example, by future acquisitions, our increased activities might not be eligible for inclusion in Israeli tax benefit programs.
If and when we
were to discontinue our policy for not distributing dividends, with respect to earnings from 2011 and beyond, tax-
exempt income generated
under the provisions of the law will subject us to taxes upon distribution or liquidation and we may be required to record deferred tax liability
with respect to such tax-exempt income, possibly affecting our results in the future . See "Item 10.E Taxation — Israeli Taxation —
Law for the
Encouragement of Capital Investments, 1959" for more information about these programs, the Investment Law and the abovementioned
amendments.
Risks Related to our Ordinary Shares and their Listing on a Stock Exchange
Although we have paid dividends in the past, our policy going forward in 2011 and beyond is not to distribute dividends. Therefore, the
return on investment in our ordinary shares will be limited to the value of our stock.
We have paid dividends in the past, however as we recently announced, our current policy is not to distribute further dividends, starting
with the profits of 2011 and beyond. If we do not pay dividends, our stock may be less valuable because a return on your investment will only
occur if our stock price appreciates. See "Item 8.A Consolidated Statements and Other Financial Information —
Policy on Dividend
Distribution" for additional information regarding the payment of dividends.
We incur significant costs as a result of being a public company.
As a 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 requirements, including requirements under the Sarbanes-
Oxley
Act of 2002, the rules of the Nasdaq Stock Market, 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) and the provisions of the Israeli Companies
Law that apply to public companies. For example, as a public company, we have created additional board committees and are required to have
two external directors, pursuant to the Israeli 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. 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.
A small number of existing shareholders hold a significant percentage of our outstanding ordinary shares and can exercise significant
influence over our actions.
As of February 28 2011, the two founding shareholders held approximately 16.7% of our outstanding ordinary shares in the aggregate.
The interests of these shareholders may differ from your interests. These shareholders, acting together, could exercise significant influence over
our operations and business strategy and will have sufficient voting power to influence all matters requiring approval by our shareholders,
including the ability to elect or remove directors, to approve or reject mergers or other business combination transactions, the raising of future
capital and the amendment of our articles of association, which govern the rights attached to our ordinary shares. In addition, this concentration
of ownership may delay, prevent or deter a change in control, or deprive you of a possible premium for your ordinary shares as part of a sale of
our Company.
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, our 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. See "Item 16.G Corporate Governance." In particular, a shareholder of an
Israeli company has a duty to act in good faith 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. See "Item 10.B Memorandum and
Articles of Association —
Approval of Related Party Transactions" for additional information concerning this duty. Our shareholders generally
may find it difficult to comply with the provisions of Israeli law.
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