Israeli Lawmakers Seek to Limit How Much Debt Pyramid Groups Can Take On

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Pyramid groups would be subject to restriction on how much debt they can take on under a new provision being added to the business concentration bill by the Knesset's Finance Committee, committee chairman MK Nissam Slomiansky (Habayit Hayehudi) said on Sunday.

The new provision would authorize the finance minister and the governor of the Bank of Israel to devise rules within three or four months after the legislation is passed.

The committee is scheduled to vote Tuesday on the section of the bill dealing with dismantling the so-called pyramids – business groups structured as cascading tiers of companies controlled by one at the top. It is believed that a majority of the panel supports rules limiting pyramids of publicly traded companies to two tiers.

This is in contrast to the position taken recently by the ministerial committee on concentration, which would allow existing pyramids a third tier of companies that issue bonds but no publicly traded stock. Members of the Finance Committee, however, said they doubt the government would retract the legislation if its position isn't accepted.

Addressing the committee on Sunday, former Finance Ministry director-general Avi Ben-Bassat said he is opposed to allowing a private company whose main source of funding comes from issuing bonds to the public to sit above the two publicly traded tiers of companies.

Pyramid structures are highly problematic because they circumvent the very basic rule of having equal voting rights for all shareholders, explained Ben-Bassat. "Two layers is also one layer too many," he said.

Shufersal, Israel's largest supermarket chain.Credit: Reuters

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