Securities Authority warns Israel Railways of potential trading suspension

The Securities Authority sent a sharp letter on Monday to the Israel Railways board of directors regarding the shortage of external directors, which is blocking the approval of financial statements and putting the company's bond trading at risk. The move comes at the peak of a management crisis, including the departure of the chairman, the absence of a permanent CEO for nearly a year, and a series of weekly operational failures.

Attorneys Roni Segev Biton and Noam Rotem from the Corporations Department at the Securities Authority sent a severe warning to acting chairman Avner Flor and acting CEO Avshalom Almaliach due to the complete absence of external directors. In an official letter, the Authority clarified that the railway does not meet corporate governance requirements for a reporting corporation with approximately 70 million NIS in traded bonds. This situation prevents the company from legally approving second-quarter financial statements, which must be published by the end of August.

According to the Authority, the term of external director Ruth Dahan-Portnoy ended in June, and external director Sarah Frisch resigned in mid-July. Currently, the board has only seven members, and "not one of them is defined as an independent director or possesses accounting and financial expertise." This paralyzes oversight procedures, as "it is impossible to convene the audit committee, the compensation committee, or the committee for reviewing financial statements."

The Authority emphasized that these violations could have dramatic consequences, warning that this "may raise questions regarding the continuation of trading in the company's securities on the stock exchange, as well as grounds for demanding the immediate repayment of the company's bonds."

The appeal follows an unprecedented petition filed by Israel Railways to the Supreme Court against Minister of Transport Miri Regev and Minister of Regional Cooperation Dudi Amsalem, demanding they appoint directors without delay. This reflects the peak of a management crisis after chairman Moshe Shimoni left in early July for a position at Mekorot. The current vacuum follows a series of departures by senior officials, some in protest against unprofessional appointments.

This management paralysis is occurring alongside operational failures directly affecting passengers, including freight train accidents damaging electrification infrastructure, prolonged escalator shutdowns at stations like Tel Aviv HaShalom, and severe service disruptions. The Securities Authority warns that without immediate ministerial intervention to staff the board, this deterioration in corporate governance will result in direct financial harm to the investing public.