A foreign person or company can operate in Israel using a variety of business structures. Corporations and partnerships are extremely important.
Furthermore, save in exceptional circumstances, the nationality of the shareholders or officers of an Israeli firm is unrestricted. In reality, all of the shareholders, officials, and directors could be nationals or residents of another country.
Corporations
Corporations are governed by the Companies Ordinance (New Version) of 1983, which was designed after British legislation and is Israel’s most frequent corporate entity. They can be private or public, limited or unlimited, domestic or international.
The procedure for incorporation comprises filing a memorandum of association and articles with the Registrar of Companies in compliance with the Companies Ordinance. These documents are acceptable in English.
It’s worth noting that a new Companies Law has been introduced and is currently being considered in Israel’s Knesset. If passed, as many legal analysts predict, it will push Israeli legislation even closer to modern, western business law, particularly that of the United States.
Private Companies
Israeli private corporations can have two to fifty shareholders and are either limited by shares or by guarantee. They cannot sell their shares or debentures to the general public, and any transfer of their shares must be approved by the board. Furthermore, a private business is not needed to publish a prospectus or submit audited financial statements to the Registrar of Companies to issue securities.
Public Companies
A minimum of seven shareholders are required for Israeli public enterprises. They can issue shares and debentures to the public on the stock exchange by producing a prospectus authorized by the Securities Authority or through private placements if the offer is limited to 35 participants. They must file financial statements with the Companies Registrar, and if their stock is traded on a stock exchange, they must follow the exchange’s rules as well as securities laws and regulations set by the Securities Authority. A public corporation must also hold a general meeting of its shareholders at least once a year, at which it must submit its management report and audited financial accounts.
The shareholders can approve dividends, elect directors, and select auditors at these meetings. Two independent, non-executive directors must serve on the board of a publicly-traded firm as public representatives.
Companies Limited by Shares
This is the most frequent corporate structure among businesses. The Corporations Ordinance ensures that shareholders in limited liability companies in Western countries enjoy the same level of protection, including limited liability for the company’s liabilities, which is treated as a separate legal entity. This protection is not absolute, and the courts can “lift the corporate veil” to remove it. This can happen when stockholders take advantage of the corporate structure to commit criminal crimes or improperly depreciate the company’s assets.
Foreign Companies
A foreign firm can operate in Israel through a subsidiary or a branch established under Israeli legislation.
A foreign firm that wishes to open a branch in Israel must register with the Registrar of Companies as a foreign corporation. A list of its directors and a power of attorney permitting an individual residing in Israel to receive legal process served on the business must be submitted to the Registrar of Companies, according to the Israeli Companies Ordinance.
Partnerships
The Partnerships Ordinance (New Version) of 1975 governs partnerships. A partnership must have at least two members and no more than twenty. The partnership agreement usually governs the relationship between the partners. Partners are entitled to their share of earnings in proportion to their share of the partnership’s capital in the absence of such an agreement. A partner may leave the partnership at any moment unless the partnership agreement states otherwise. Unless the partnership agreement states otherwise, the withdrawal of a partner will result in the partnership being liquidated.
The Partnerships Ordinance specifies that failure to register will not be taken into account when determining whether or not a partnership exists. A limited partnership cannot begin operations unless it is registered.
Limited partnership
There must be at least one general partner and one limited partner in a limited partnership. In a general partnership, the general partner has unlimited accountability for the partnership’s commitments. A limited partner’s responsibility is restricted to the amount invested in the partnership. The limited partner is not allowed to engage in partnership management and has no authority to bind the partnership. Furthermore, a limited partner may not draw on or receive in return any part of his investment in the limited partnership while it is in existence, either directly or indirectly. If someone violates this principle, he may be held accountable for the limited partnership’s obligations up to the amount removed.
General partnership
In a general partnership, all partners are jointly and severally liable for the partnership’s liabilities,
which can include the partners’ assets. Each partner is allowed to engage in business management and is considered an agent of the partnership.
Foreign Partnership
A foreign partnership may conduct business in Israel, but it must first register with the Registrar of Partnerships and obtain a permit from the Ministry of Justice before establishing a location.
