Companies Law, 5759-1999
חוק החברות, תשנ"ט-1999
Published: 1999-05-27Consolidated Hebrew text as of 2026-03-17 · Last amended 2024-09-15✓ Amendment status checked against the Knesset legislation record on 2026-09-28
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Part 9: General Provisions
Chapter I: Change of Type of Corporation
Change of Type of Company§
343.
(a)A private company that has become a public company or a public company that has become a private company, as well as a company that has become a reporting corporation or a company that has ceased to be a reporting corporation, and a company that has become a bond company or that has ceased to be such a company, shall notify the Registrar of Companies thereof within fourteen days of that date.
(b)The Minister, after consultation with the Securities Authority, may prescribe provisions for the implementation of this section, including provisions regarding documents that shall be transferred from the Registrar of Companies to the Securities Authority or from the Securities Authority to the Registrar of Companies.
Change of Liability of Shareholders§
344.
(a)A company in which the liability of shareholders is not limited may amend its articles and determine, with the approval of the court on an application under section 350(a) and on such conditions as it shall prescribe, that the liability of its shareholders is limited; the Minister may prescribe provisions for the implementation of this section.
(b)A company in which the liability of shareholders is limited may amend its articles, with the consent of all shareholders, and determine that the liability of its shareholders is not limited.
Conversion of a Cooperative Society into a Company§
345.
(a)A registered cooperative society (in this section — society) that seeks to be registered as a company shall prepare a plan for its organisation as a company and submit it for approval to the Registrar of Cooperative Societies as defined in the Cooperative Societies Ordinance.
(b)The Minister, in consultation with the Minister of Labour and Welfare, may prescribe the conditions under which the Registrar of Cooperative Societies may approve a plan submitted to him pursuant to the provisions of subsection (a), including conditions designed to ensure that the position of the society's creditors is not adversely affected.
(c)If the Registrar of Cooperative Societies has approved the plan, the plan shall be brought for approval before a general meeting of the society of which due notice of twenty-one days was given and in which the plan was set out in detail; if the plan was adopted by a majority of at least three-quarters of the members entitled to vote who voted in person or by proxy, articles shall be drawn up pursuant to this Law, and upon submission of the application for registration, a copy thereof shall be delivered to the Registrar of Companies and fees shall be paid as the Minister shall prescribe.
(d)If the Registrar of Companies has approved the registration, it shall notify the Registrar of Cooperative Societies thereof, who shall cancel the registration of the society as a cooperative society and shall publish notice thereof in Reshumot; after the cancellation, the Registrar of Companies shall register the society as a company.
(e)Upon registration of the society as a company, the Registrar of Cooperative Societies shall transfer to the Registrar of Companies a transcript of all registrations in its charges register relating to charges created by the society before its registration as a company and which were in existence at the time of registration, and of all documents in its possession creating or evidencing those charges, and the Registrar of Companies shall register, without a fee, the charges and the particulars in the transcript relating to each charge.
(f)All the assets and liabilities, including known and unknown liabilities, existing and contingent, of the society shall pass upon registration to the company, and all legal proceedings to which the society is a party may be continued with the company as the party to those proceedings.
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Contact Us →Chapter I-A: Public Benefit Company
Section A: Public Benefit Company — General Provisions
Public Benefit Company§
345a.
(a)A public benefit company is a company whose articles prescribe exclusively public purposes and also prohibit the distribution of profits or any other distribution to its shareholders (in this Chapter — distribution of profits).
(b)In this Chapter, "public purposes" means a purpose as detailed in the Second Schedule; the Minister, with the approval of the Constitution, Law and Justice Committee of the Knesset, may amend the Second Schedule.
Registration of a Public Benefit Company§
345b.
(a)A person who seeks to register a company whose articles prescribe exclusively public purposes and also prohibit the distribution of profits shall declare before the Registrar that he seeks to register a public benefit company; the following documents shall be attached to the application, in two copies:
(1)documents pursuant to section 8, including articles in which it is prescribed that the company is a public benefit company in accordance with the requirements of this Chapter;
(2)a declaration by the first members of the audit committee of their willingness to serve as members of the audit committee, in accordance with the form relating to the declaration of first directors, with the necessary modifications;
(3)the name and address of the promoter;
(4)particulars of the assets to be conveyed to the company whose registration is applied for and the parties from whom they were transferred;
(5)a declaration by the shareholders, the first directors and the first members of the audit committee that they are aware that registration of a public benefit company is being applied for.
(b)If the Registrar sees that registration of a public benefit company, or amendment of articles pursuant to subsection (c), is being applied for, the Registrar shall not register the company or the amendment of the articles unless the Registrar of Endowments has confirmed that, after its registration or after the amendment of the articles, the conditions referred to in section 345a(a) will be met and its articles conform to the provisions of this Chapter, and this after all information requested for this purpose has been provided; the Registrar of Endowments shall give its reply within 45 days of the date on which all documents and information required for this purpose were received.
(c)Where a company has passed a resolution to amend its articles as a result of which the conditions referred to in section 345a(a) will be met, it shall notify the Registrar thereof by affidavit signed by the majority of its directors and its general manager, and such a resolution shall have no effect unless the amendment has been registered by the Registrar; the documents referred to in subsection (a) shall be attached to the company's application for registration of the amendment of the articles, with the necessary modifications.
(d)After the registration of a public benefit company or after the registration of an amendment of articles, a certificate of incorporation or an amended certificate of incorporation, as the case may be, shall be issued to the company, stating that it is a public benefit company and that the approval of the Registrar of Endowments has been received in that regard.
(e)Where the Registrar has registered a public benefit company or has registered an amendment of articles of such a company, the Registrar shall transfer to the Registrar of Endowments a copy of the certificate of incorporation or of the amended certificate of incorporation of the company and of its articles, as well as a copy of the documents delivered pursuant to subsection (a) or (c), as the case may be, for the purpose of its registration in the register referred to in section 345c.
(f)Where it is stated in the certificate of incorporation of the company that it is a public benefit company and that the approval of the Registrar of Endowments has been received in respect of its registration, it shall be regarded as a company registered in the register referred to in section 345c.
(g)Where the company has not made the declaration before the Registrar as referred to in this section, this shall not detract from its being a public benefit company, and it is required to submit an application to the Registrar of Endowments for registration in the register referred to in section 345c, together with a copy of the certificate of incorporation and of the list of shareholders and directors of the company and also of the documents referred to in subsection (a); upon receipt of a notice from the Registrar of Endowments as referred to in section 345c(c), regarding the registration of such a company in the register, the Registrar shall amend the certificate of incorporation of such a company as referred to in subsection (d), with the necessary modifications.
(h)The Minister may prescribe forms for the submission of an application under this section and also additional documents to be attached to the application.
Register of Public Benefit Companies§
345c.
(a)The Registrar of Endowments shall maintain a register of public benefit companies (in this Chapter — the register).
(b)The register shall be open for public inspection and any person may inspect it.
(c)Where the Registrar of Endowments has received from the Registrar the certificate of incorporation of a public benefit company and the documents delivered to it in respect thereof pursuant to section 345b(e), it shall register the company in the register; where the Registrar of Endowments has received an application from a public benefit company for registration in the register, it shall register the company in the register and shall notify the company and the Registrar of the registration, if it has confirmed that the company's articles conform to the provisions of this Chapter, and this after all information requested for this purpose has been provided.
(d)
(1)Without prejudice to the obligation of a public benefit company to submit an application for its registration pursuant to the provisions of section 345b, where the Registrar of Endowments has become aware by another means of the existence of a company operating exclusively for public purposes and prohibiting the distribution of profits, it shall register it in the register;
(2)Registration as referred to in paragraph (1) shall be carried out after the Registrar of Endowments has sent, by registered post, a notice to the company of its intention to register it in the register; if the company has not responded to the notice within 45 days of the date of dispatch of the notice, the Registrar of Endowments shall register it in the register and shall notify the company and the Registrar thereof;
(3)Upon receipt of the notice of the Registrar of Endowments, the Registrar shall amend the certificate of incorporation of the company as referred to in section 345b(d) and shall deliver it to the company, and the company shall be regarded as a public benefit company.
(e)The Minister may prescribe which particulars shall be included in the register.
Assistance and Guidance to Public Benefit Companies in the Management of Their Affairs§
345c1.
The Registrar of Endowments shall publish information and guidelines for public benefit companies, and shall, to the extent possible, observe their activities and conduct training sessions for them, all in order to assist them in managing their affairs in accordance with the provisions of the Law.
Indication of PBC Alongside Company Name§
345d.
(a)A public benefit company registered in the register shall indicate, alongside its name, in every document, signage or publication issued on its behalf, the suffix "public benefit company" or "(PBC)".
(b)A company that is not a public benefit company and also a public benefit company that has not been registered in the register shall not indicate alongside its name the suffix referred to in subsection (a), and shall not present itself in any other manner as a public benefit company.
Restriction on Amendment of Articles§
345e.
(a)Notwithstanding the provisions of section 20, a public benefit company may not amend, directly or indirectly, the purposes prescribed in its articles, including the provisions in its articles relating to the designation of assets in a winding up, or the provisions in its articles prohibiting the distribution of profits, and it shall not include, directly or indirectly, a provision in its articles that is contrary to the provisions of section 345g; an amendment of articles as aforesaid shall have no effect unless the amendment has been approved in accordance with the provisions of this section.
(b)Notwithstanding the provisions of subsection (a), a public benefit company may, in accordance with the provisions of section 20, resolve to replace a public purpose prescribed in its articles, including the provisions in its articles relating to the designation of assets in a winding up, with another public purpose, and also to add a public purpose to the public purposes prescribed in its articles or to remove a public purpose therefrom; before the resolution of the general meeting on the change of public purposes as aforesaid is passed, the board of directors shall present to it particulars of the assets accumulated for the company's purposes prior to the requested change, and the commitments undertaken by the company in this regard, including towards donors to the company.
(c)A resolution of the general meeting as referred to in subsection (b) requires registration by the Registrar of Endowments or approval of the court as detailed below, as the case may be:
(1)if the public purpose that the company seeks to replace in its articles, to remove therefrom or to add thereto is closely related to the public purpose being replaced or to the other public purposes prescribed in its articles (in this section — a closely related purpose), such a change requires registration by the Registrar of Endowments; if the Registrar of Endowments is of the opinion that the said purpose is not a closely related purpose, it shall notify the company thereof, and the company shall act as referred to in paragraph (2);
(2)if the public purpose that the company seeks to replace in its articles or to add thereto is not a closely related purpose, or if there is no closely related purpose in the articles to the purpose it seeks to remove therefrom, such a change requires the approval of the court.
(d)The Registrar of Endowments shall not register a change of purposes as referred to in subsection (c)(1) unless it is satisfied that in the circumstances of the matter it is just and right to do so, having regard to the company's purposes, its activities before the change, and the commitments undertaken by the company for the purpose of the change.
(e)The court shall decide on an application for a change of purposes of a public benefit company under this section, after having given the Registrar of Endowments an opportunity to express its position; the court shall not approve a change of purposes unless it is satisfied that in the circumstances of the matter it is just and right to do so, having regard to the company's purposes and its activities before the change, and on such conditions and arrangements as it shall prescribe.
(f)The Registrar shall not register a change of purposes of a public benefit company pursuant to section 40 unless the Registrar of Endowments has registered such a change or unless it has received from the company a copy of the court's decision approving such a change, pursuant to this section.
(g)The Minister may prescribe provisions regarding the obligation of a public benefit company to give notice of its intention to change its purposes or of a change of purposes, and the means of giving such notice, as well as the times for giving the notice, having regard to types of companies, and may authorise the Registrar of Endowments to prescribe such provisions in respect of a particular company, having regard to its nature or the circumstances of the matter.
Action in Excess of Purposes§
345f.
Notwithstanding the provisions of section 56(b), retroactive approval by a public benefit company of an action taken in excess of the purposes prescribed in its articles shall be given by the general meeting with the approval of the court; the court shall not approve such an action unless it is satisfied that in the circumstances of the matter it is just and right to do so, having regard to the company's purposes and its activities.
Prohibited Distribution§
345g.
(a)Notwithstanding the provisions of section 301, a public benefit company may not make a distribution of profits, directly or indirectly, including a distribution of profits to the promoter of the company, and any distribution of profits made by it shall be regarded for the purposes of this Law as a prohibited distribution.
(b)The provisions of this section shall not apply to a small and reasonable gift given in accordance with the custom in the circumstances of the matter.
Audit Committee§
345h.
(a)The general meeting of a public benefit company shall appoint an audit committee in accordance with provisions made under subsection (h), to the extent that such provisions have been prescribed; office holders of the company shall not be members of the audit committee.
(b)The provisions of Sections B to G of Chapter III in Part Three shall apply, with the necessary modifications, to the convening of meetings of the audit committee and the manner of its conduct; for the purposes of those provisions, a public benefit company shall be regarded as a public company.
(c)The provisions of sections 114, 115(a), (b), (d) and (f), 116a, 117 and 118 shall not apply to an audit committee in a public benefit company.
(d)The liability, rights and duties of members of the audit committee shall be as those of directors of the company, subject to the provisions made under section 345j.
(e)The following are the functions of the audit committee:
(1)to examine the regularity of the company's operations and its organs, including the conformity of the company's operations with its objects;
(2)to examine the attainment of the company's targets with efficiency and economy;
(3)to monitor the implementation of the decisions of the general meeting and the board of directors;
(4)to identify deficiencies in the management of the company, inter alia by consulting with the company's internal auditor or the auditing accountant, to the extent that either has been appointed, and to propose to the board of directors ways to remedy them; if the audit committee finds that a deficiency as aforesaid is a material deficiency, it shall hold at least one meeting concerning the deficiency in question without the presence of office holders of the company, and, to the extent possible, in the presence of the internal auditor or the auditing accountant, as the case may be; notwithstanding the foregoing, the committee shall afford the audited body an opportunity to present its position before it, and an office holder may be present at such a meeting for the purpose of presenting a position on a matter within the scope of that person's responsibility, if the committee has so requested;
(5)to examine the financial affairs of the company, its books of account and salary payments therein, including the allocation of the company's funds to the advancement of its objects;
(6)to decide whether to approve actions and transactions requiring the approval of the audit committee pursuant to sections 255 and 268 to 275;
(6a)to decide, on the basis of reasons to be set out, in respect of actions as referred to in section 255, whether they are material actions or non-material actions, and in respect of transactions as referred to in section 270(1) and (4), whether they are extraordinary transactions or non-extraordinary transactions, for the purpose of their approval under this Law, and the audit committee may so decide in respect of a category of actions or transactions, according to criteria that it prescribes in advance; where the audit committee has prescribed such criteria, it shall review the manner of their application from time to time and at least once a year;
(6b)to examine the company's internal audit system and the functioning of the internal auditor, and whether the resources and tools necessary for the fulfilment of that person's role are available to that person, and also to examine the internal auditor's work plan before its submission for approval by the board of directors and to propose amendments thereto, all with regard, inter alia, to the company's special needs and its size;
(6c)to examine the scope of the work of the auditing accountant and that person's remuneration, and to bring its recommendations before whoever determines the auditing accountant's remuneration pursuant to sections 155 and 165;
(6d)to establish arrangements regarding the manner of handling complaints by employees of the company in connection with deficiencies in the management of its affairs, and regarding the protection to be afforded to employees who have submitted such complaints;
(7)to examine any other matter connected with the activity of the company;
(8)to bring before the board of directors and the annual meeting its conclusions in light of an examination as referred to in this subsection.
(f)The audit committee shall send notice of its meetings and the items on the agenda to the auditing accountant of the company and to the internal auditor of the company, and they shall be entitled to participate in meetings of the audit committee.
(g)The audit committee may demand the convening of the board of directors or the general meeting, for the purpose of bringing its conclusions before them, and if a board of directors meeting or general meeting has not been convened, to convene them itself, and the provisions of section 64 or 98 shall apply, as the case may be, with the necessary modifications.
(h)The Minister may prescribe provisions regarding —
(1)a minimum number of audit committee members to serve in public benefit companies whose turnover exceeds an amount prescribed by the Minister;
(2)eligibility conditions required of audit committee members, generally or for categories of public benefit companies.
(i)In this Chapter, "turnover" means the total annual receipts of a public benefit company from every source and type, received on average over the three financial years that have elapsed, and if three financial years have not yet elapsed since the establishment of the company — the amount of receipts as aforesaid received on average over the financial years that have elapsed since its establishment.
Internal Auditor§
345i.
(a)The board of directors of a public benefit company whose turnover exceeds ten million New Israeli Shekels, or a higher amount prescribed by the Minister, shall, with the agreement of the audit committee, appoint an internal auditor pursuant to the provisions of sections 146(b) to 148 and 150 to 153, with the necessary modifications; if the board of directors and the audit committee have not reached agreement on the appointment of the internal auditor, the general meeting shall decide.
(b)The internal auditor shall submit to the board of directors for approval a proposal for an annual or periodic work plan, after the audit committee has examined it as referred to in section 345h(6b), and the board of directors shall approve it, with such modifications as it sees fit.
Remuneration of Directors, Members of the Audit Committee, and Other Office Holders§
345j.
(a)A director or a member of the audit committee, and also a corporation controlled by any of them, shall not provide, directly or indirectly, paid services to a public benefit company other than as a director or member of the audit committee, as the case may be; the Minister may prescribe provisions regarding categories of companies, having regard to their objects and to the number of persons employed by them, in which it shall be possible to appoint an employee or a person who provides paid services to the company as a director, except as chairperson of the board of directors, provided that the number of such directors shall not exceed one-quarter of all members of the board of directors; for the purposes of this subsection, "control" has the meaning assigned to it in section 1, including the presumption that a person controls a corporation if that person holds 25 per cent or more of the issued capital of the corporation or of the voting rights in the corporation, and an individual and that person's relative shall be regarded as one person.
(b)The Minister shall prescribe provisions regarding the salary or remuneration to be paid to directors and members of the audit committee in a public benefit company, and regarding the terms of their tenure, including restrictions on salary, remuneration and terms of tenure as aforesaid; and the Minister may prescribe provisions as aforesaid regarding other office holders in a public benefit company, including regarding the terms of their employment; provisions made under this subsection may be prescribed for categories of public benefit companies.
(c)If an office holder or a member of the audit committee has received remuneration in contravention of the provisions made under this section, including for services rendered to the company, that person shall be required to return to the company what was received, unless that person proves that at the time of engaging with the company, that person did not know and was not required to know of the existence of the remuneration restriction.
Expenses for Management of a Public Benefit Company§
345k.
The Minister may prescribe a maximum rate of expenses that a public benefit company may incur for its management, including for salary and remuneration, in proportion to its turnover or to the funds it has expended for the advancement of its objects; provisions as aforesaid may be prescribed for categories of public benefit companies.
Approval of Certain Transactions§
345l.
(a)The provisions of section 255 and the provisions made under Chapter Five of Part Six, with the exception of sections 272(c) and (c1), 273(b), 275(c1) and 279, which apply to a public company, shall apply to transactions of a public benefit company, even if it is a private company, with the necessary modifications and subject to the other provisions of this Chapter, and with these modifications:
(1)a transaction of a public benefit company with a director or with a member of the audit committee or with a corporation controlled by any of them requires, in addition to what is stated in section 275, also the approval of the court after it has afforded the Registrar of Endowments an opportunity to express a position; the court shall not approve the transaction unless it is satisfied that in the circumstances of the matter it is just and proper to do so; in this paragraph, "transaction" excludes a transaction for the provision of paid services that is prohibited under the provisions of section 345j(a), and excludes an engagement pursuant to the provisions of this Law regarding the terms of tenure of that person as a director or member of the audit committee, as the case may be;
(2)an extraordinary transaction of a public benefit company with any of those listed below, or with a corporation controlled by any of them, requires, in addition to what is stated in section 275, also the approval of the court, after it has afforded the Registrar of Endowments an opportunity to express a position: a relative of a director, a relative of a member of the audit committee, a shareholder of the company or that person's relative, or the promoter of the company or that person's relative;
(3)a transaction of a public benefit company with any of those enumerated in paragraph (2), that is not an extraordinary transaction, requires the approval of the audit committee and thereafter the approval of the board of directors, and notice of the approval of the transaction and its particulars shall be delivered to the Registrar of Endowments; if the Registrar of Endowments is of the opinion that the transaction is an extraordinary transaction, the Registrar of Endowments shall so notify the company within thirty days from the date on which the company's notice was received, and the transaction shall require approval as referred to in paragraph (2);
(4)wherever the approval of the remuneration committee is required, it shall be regarded as if the approval of the audit committee is required;
(5)section 272(a) shall apply to an engagement with an office holder who is not a director or a member of the audit committee with respect to the terms of that person's tenure and employment.
(b)The provisions of subsection (a)(1) and (3) shall not apply to a transaction for a minimal amount or to a transaction whose terms are identical to those of other transactions of the company with the general public.
(c)Without derogating from the provisions of subsection (a), the provisions of section 280 shall apply to transactions that were not approved in accordance with the provisions of this section.
(d)In this section, "control" has the meaning assigned to it in section 345j(a).
Liability of Office Holders and Members of the Audit Committee§
345m.
(a)Notwithstanding the provisions of section 258(b), a public benefit company is not entitled to exempt an office holder or a member of the audit committee therein from liability for breach of the duty of care towards it, or to give an undertaking of indemnification in respect of a breach of the duty of care, and any such undertaking of indemnification shall have no effect.
(b)In a public benefit company that has not been registered in the register, the office holders therein shall be regarded as having breached their duty towards the company, unless the office holder proves one of the following:
(1)that the office holder took all reasonable measures to register the company;
(2)that the office holder relied in good faith on information from a functionary of the company who is competent to provide it, to the effect that no obligation to register applied or that the company was registered as required;
(3)that by reason of the special circumstances of the matter, the office holder was not required to know of the breach of the obligation to register in the register;
(4)that the company acted in accordance with the other provisions of this Chapter, even if it was not registered in the register.
Derivative Claims and Derivative Defence§
345n.
(a)In addition to the provisions of section 194(a), the Registrar of Endowments may also, with the approval of the Attorney General, bring a derivative claim in a matter of a public benefit company.
(b)In addition to the provisions of section 203(a), the Registrar of Endowments or the Attorney General may also defend in the name of a public benefit company.
(c)Provisions made under Section A of Chapter III of Part Five shall apply to a derivative claim or a derivative defence as referred to in this section, as the case may be, with the necessary modifications.
Transfer of Shares§
345o.
(a)A shareholder in a public benefit company shall not transfer a share for consideration unless prior approval of the court has been given therefor, after the Registrar of Endowments has been afforded an opportunity to express a position; however, the transfer of shares for consideration of a minimal amount shall not require approval as referred to in this section, provided that the shareholder has reported in advance to the Registrar of Endowments on the transfer of the share as aforesaid.
(b)Without derogating from the provisions of subsection (a), a share in a public benefit company is not transmissible by inheritance, attachable or chargeable, and shall not form part of the assets of the shareholder available for distribution upon that person's winding-up or in insolvency proceedings applicable to that person, as the case may be, and shall not vest in a liquidator or trustee, as the case may be; upon the death of a shareholder or upon that person's winding-up, its status shall be as that of a dormant share, as defined in section 308.
Merger§
345p.
(a)A public benefit company may merge, pursuant to the provisions of this Law, only with another public benefit company, or with an association having public objects as defined in this Chapter, provided that in addition to the approvals required for a merger pursuant to this Law, the court has approved the merger; the provisions of Chapter D2 of the Associations Law shall apply to a merger as referred to in this section, with the necessary modifications.
(b)The court shall not approve a merger as referred to in this section unless it is satisfied that in the circumstances of the matter it is just and proper to do so, having regard to the objects of the merging companies and their activities prior to the merger, and subject to such conditions and arrangements as it prescribes.
(c)The court shall decide on an application for approval of a merger as referred to in this section after it has afforded the Registrar of Endowments an opportunity to express a position.
Compromise or Arrangement§
345q.
(a)Notice of any proceeding under Chapter III of Part Nine, concerning a public benefit company, shall be delivered to the Registrar of Endowments, and the Registrar of Endowments shall be afforded an opportunity to express a position.
(b)The shareholders of a public benefit company shall not be entitled, in the framework of a proceeding under Chapter III of Part Nine, to a share in the assets of the company solely by reason of being shareholders therein.
(c)The court shall not approve a compromise or arrangement under Chapter III of Part Nine, concerning a public benefit company, unless it is satisfied that in the circumstances of the matter it is just and proper to do so, having regard to the objects of the company and its activities, and provided that the compromise or arrangement conforms with the provisions applicable to a public benefit company under this Chapter, including the provisions regarding the amendment of the company's objects or its winding-up, according to the nature of the proposed compromise or arrangement.
Appointment of Investigator§
345r.
(a)If there is a reasonable ground for concern that a public benefit company is not complying with the provisions under this Law or is not complying with the provisions of its articles, the Registrar of Endowments may, upon the application of a shareholder or shareholders holding at least 25 per cent of the issued capital or at least 25 per cent of the voting rights in the company, upon the application of the audit committee, upon the application of the Attorney General, or on the Registrar of Endowments' own initiative, investigate the affairs of that company, and for that purpose the Registrar of Endowments shall have the powers conferred by sections 9 to 11 and 27(b) of the Commissions of Inquiry Law, 5729-1968.
(b)For the purpose of conducting an investigation as referred to in subsection (a), the Registrar of Endowments may appoint an investigator; where an investigator has been appointed, that investigator shall have the investigative powers referred to in subsection (a), subject to the conditions of appointment; the investigator shall submit a report to the Registrar of Endowments.
(c)Where an investigator has been appointed as referred to in subsection (b), the Registrar of Endowments may impose the costs of the investigation, in whole or in part, upon the public benefit company, upon office holders therein, or upon a person who applied to the Registrar of Endowments with a request to open an investigation, and the Registrar of Endowments may require the person requesting the investigation to provide security for the costs thereof.
Winding-up by the Court§
345s.
(a)A public benefit company shall be wound up by the court pursuant to the provisions of the Companies Ordinance that continue to apply pursuant to section 345w, and subject to the provisions of this Chapter.
(b)In addition to the grounds for winding-up prescribed in the Companies Ordinance and in this Law, the court may wind up a public benefit company upon the occurrence of one of the following:
(1)the company's operations are conducted in contravention of the law, its objects or its articles;
(2)a person appointed to conduct an investigation pursuant to section 345r has recommended the winding-up of the company.
(c)An application for the winding-up of a public benefit company on one of the grounds enumerated in subsection (b) shall be filed by the Attorney General or by the Registrar of Endowments; an application for the winding-up of a public benefit company on the grounds enumerated in section 257 of the Companies Ordinance may also be filed by the Registrar of Endowments.
(d)An application for the winding-up of a public benefit company shall not be filed by the Attorney General or by the Registrar of Endowments on the ground enumerated in paragraph (1) of subsection (b), or by the Registrar of Endowments on the ground enumerated in section 257(5) of the Companies Ordinance, unless the Registrar of Endowments has first warned the company, in writing, to remedy the defect, and the company has failed to do so within the period of time prescribed by the Registrar of Endowments for that purpose, or if no period of time has been prescribed, within a reasonable time after receipt of the warning.
Voluntary Winding-up§
345t.
(a)Notwithstanding the provisions of section 345s, a public benefit company may be wound up voluntarily pursuant to the provisions of the Companies Ordinance that continue to apply pursuant to section 345w, provided that, in addition to the conditions required under that Ordinance, the following conditions are also met:
(1)before the dispatch of invitations to the company meeting at which it was proposed to wind it up voluntarily, a majority of the directors and a majority of the members of the audit committee made a declaration that they have examined the state of the company's business and satisfied themselves that the company will be able to discharge its debts in full within one year from the commencement of the winding-up, and this declaration was filed with the Registrar and the Registrar of Endowments at least 21 days before the dispatch of the invitations; the declaration shall be made, inter alia, on the basis of financial statements as defined in Chapter Six of Part Four, as at 31 December of the year preceding the date of filing of the declaration (in this section — the determining date), and if more than two months have elapsed from the determining date, also on the basis of reviewed financial statements in accordance with generally accepted accounting principles, reflecting the company's position as close as possible to the date of filing of the declaration and reviewing, inter alia, the material changes from the determining date; the aforesaid statements shall be appended to the declaration and filed together therewith as aforesaid with the Registrar and the Registrar of Endowments;
(2)the company has delivered notice of its decision to wind up voluntarily to the Registrar and to the Registrar of Endowments.
(b)In addition to the provisions of section 321 of the Companies Ordinance, a decision on voluntary winding-up shall be published within seven days from the date of its adoption in a daily newspaper printed in the Hebrew language, and in the case of a company whose main business is conducted in the Arab sector — also in a daily newspaper printed in the Arabic language; the Registrar of Endowments may direct the company to publish the decision in other ways, if the Registrar of Endowments finds it necessary to do so in the circumstances of the matter.
(c)In addition to the provisions of sections 262 and 341 of the Companies Ordinance, where a public benefit company is being wound up voluntarily, the court may, at any stage, on the application of the Registrar of Endowments, direct that the winding-up be by the court, if it finds that there is a public interest in the court's supervision of the winding-up proceedings of the company.
(d)Reports that the liquidator is required to submit in a voluntary winding-up pursuant to the Companies Ordinance shall be approved by the audit committee.
General Provisions Regarding Winding-up§
345u.
(a)The shareholders of a public benefit company shall not be entitled, upon its winding-up, to a share in its assets solely by reason of being shareholders as aforesaid.
(b)Where a public benefit company has been wound up and, after its debts have been discharged in full, assets remain, they shall be dealt with in accordance with the provisions of the articles, provided that if the company was wound up by the court, the court is satisfied that the said provisions will not result in the company's assets being distributed, after its winding-up, directly or indirectly, to the shareholders or to the promoter of the company, or in assets being transferred, after the winding-up, directly or indirectly, for purposes that are not public purposes close to the company's objects immediately before the date of winding-up; and if the company was wound up voluntarily, the Registrar of Endowments is so satisfied; in the absence of such provisions or in the absence of the possibility of acting in accordance therewith, these assets shall be transferred, pursuant to the directions of the court, to a public purpose determined by the court as being close to the objects of the company.
(c)The provisions of subsection (b) shall not apply with respect to an asset in respect of which it was stipulated at the time of its transfer to the company, in an agreement or in the company's articles, that it shall be transferred after the winding-up to the person who transferred it to the company (in this subsection — the transferor) or to another person designated by the transferor.
Standing of the Registrar of Endowments in Winding-Up Proceedings§
345v.
(a)A copy of every application filed in the course of a proceeding for voluntary winding-up or for winding-up by the court of a public benefit company, and of every decision given in the course of such a proceeding, shall be delivered to the Registrar of Endowments, and every notice or report in connection with such winding-up that is required to be delivered to the Registrar under the Companies Ordinance shall also be delivered to the Registrar of Endowments.
(b)The court shall decide on an application filed as referred to in subsection (a) after having given the Registrar of Endowments an opportunity to express its position.
(c)The Registrar of Endowments may apply to the court with a request that it decide any question arising from the winding-up.
Application of Provisions of the Companies Ordinance§
345w.
The provisions under the Companies Ordinance, except for sections 352 to 356 of that Ordinance, with respect to winding-up by the court or voluntary winding-up, as the case may be, that continue to apply pursuant to section 376(1) of the Insolvency and Economic Rehabilitation Law, as well as the provisions under Part D of that Law, shall apply to the winding-up of a public benefit company with the necessary modifications, unless otherwise prescribed under this Chapter; however, in any conflict between those provisions and the provisions under this Chapter, the provisions under this Chapter shall prevail; the provisions under Part Eight A of this Law shall not apply to the winding-up of a public benefit company.
Duty to Report and Submit Documents§
345x.
(a)A public benefit company that is required to submit an annual report and other reports pursuant to the provisions of sections 140 and 141 shall also submit them to the Registrar of Endowments; a notice in connection with the transfer of shares or appointments to the board of directors and changes in its composition pursuant to section 140 shall state that the transferee shareholder or the appointed director, as the case may be, is aware that the company is a public benefit company.
(b)A public benefit company shall be subject to the duties of reporting and submission of documents applicable to an association under sections 36, 36a, 38, 38a and the Second Schedule to the Associations Law, as well as the provisions of section 38b of that Law; however, the reports and documents referred to shall be submitted to the Registrar of Endowments and the powers of the Registrar of Associations under those sections, for the purposes of this section, shall vest in the Registrar of Endowments.
(c)The financial report and the verbal report as defined in the Associations Law shall be approved by the general meeting and submitted no later than 30 June in the year following the end of the reporting period, and the Registrar of Endowments may extend the deadline for their submission.
(d)The Minister may prescribe, generally or for categories of public benefit companies, duties of reporting and submission of documents to the Registrar or to the Registrar of Endowments that shall apply to such companies, in addition to the duties applicable to them under the provisions of this Law, including submission by electronic reporting, and may also prescribe forms that must be used for the purposes of this Chapter and the particulars to be included therein.
(e)The documents submitted to the Registrar of Endowments pursuant to this section shall be open for inspection by any person at its offices, and the provisions of section 39 of the Associations Law shall apply with respect to inspection of documents in the file of a public benefit company and with respect to their publication to the public, with the necessary modifications.
(f)The powers of the Registrar of Associations to grant an exemption for the purposes of this section shall vest in the Registrar of Endowments.
Authorisation of Inspectors and Powers of Supervision§
345x1.
(a)The Registrar of Endowments may authorise, from among the employees of the Ministry of Justice subordinate to it, inspectors for the purpose of supervising the implementation of the provisions under this Law applicable to public benefit companies; however, no person shall be appointed as an inspector unless all of the following conditions are met in relation to that person:
(1)that person has not been convicted of an offence that, by reason of its nature, gravity or circumstances, renders that person unfit, in the opinion of the Registrar of Endowments, to serve as an inspector;
(2)that person has received appropriate training in the field of the powers to be vested in that person under this Law, as directed by the Minister;
(3)that person meets additional eligibility conditions, if any, as directed by the Minister.
(b)For the purpose of supervising the implementation of the provisions under this Law, the Registrar of Endowments and an inspector may —
(1)require a person whom there is reasonable ground to believe is an employee of a public benefit company, holds an office therein or has another function therein and is present at a place where the company operates or where there is reasonable ground to believe it operates, to provide that person's name and address and to produce before the inspector an identity card or other official document identifying that person;
(2)enter, at any reasonable time, any place referred to in paragraph (1), provided that entry to a place used as a residence shall be made only pursuant to a court order; the entry shall be carried out in the company of the person in charge of the place or that person's representative, however refusal to accompany the inspector shall not prevent the inspector from performing the inspector's function; the exercise of the power under this paragraph shall be carried out in accordance with a supervision plan approved by the Registrar of Endowments for this purpose;
(3)require an employee of the company, a person holding an office therein, a person having another function therein or any other person concerned to provide any information or document in that person's possession, including an output as defined in the Computers Law, 5755-1995, that may ensure or facilitate the implementation of the provisions under this Law or of the provisions of the company's articles.
(c)The exercise of supervision powers under this section shall be carried out in accordance with procedures to be prescribed by the Registrar of Endowments, having regard to the unique characteristics of the place and the activity conducted therein and to the recipients of services from the company.
(d)An inspector shall not exercise the powers vested in that inspector under this section except in the course of performing the inspector's function and to the extent necessary for that purpose, and provided that all of the following conditions are met:
(1)the inspector visibly wears a badge identifying that inspector and that inspector's function;
(2)the inspector holds a certificate signed by the Registrar of Endowments attesting to the inspector's function and powers, which shall be produced upon request.
Engagement of an External Examiner, Powers and Duties§
345x2.
(a)For the purpose of examining a public benefit company's compliance with the provisions under this Law applicable to it and with the provisions of its articles, the Registrar of Endowments may engage an examiner, even if that examiner is not a civil servant (in this Chapter — external examiner), who shall conduct examinations in accordance with a list of matters to be published by the Registrar of Endowments on the Ministry of Justice website (in this Chapter — examinations), and in the manner and frequency as directed by the Registrar of Endowments.
(b)An external examiner shall act on behalf of the Registrar of Endowments, in accordance with the Registrar's guidance and instructions and under the Registrar's supervision.
(c)The external examiner shall deliver to the company a draft of the final report and shall notify the company of its right to submit its response within 30 days or within a longer period approved by the Registrar of Endowments; the external examiner shall submit to the Registrar of Endowments the final report, which shall include the findings of the examination, the company's response thereto and the examiner's recommendations; a copy of the report shall be delivered to the company.
(d)An external examiner shall not exercise any power involving the exercise of discretion vested in the Registrar of Endowments by law.
(e)A person who considers themselves aggrieved by an examination conducted by an external examiner, by the findings of the examination, by the examiner's recommendations or by any other action of the examiner, may apply in a reasoned written request to the Registrar of Endowments.
(f)The Registrar of Endowments may, upon an application referred to in subsection (e) or on the Registrar's own initiative, give an external examiner instructions regarding the conduct of examinations, review the findings of the examinations, conduct additional examinations personally, appoint another external examiner, or act in any other manner the Registrar sees fit.
(g)An external examiner and every employee conducting examinations on that examiner's behalf pursuant to this section shall have the same status as civil servants for the purposes of the provisions relating to public servants in the Penal Law, 5737-1977.
Approval to Serve as External Examiner, Suspension and Revocation§
345x3.
(a)The Registrar of Endowments may grant approval to serve as an external examiner to a person in whom all of the following conditions are met:
(1)that person is a resident of Israel who is at least 25 years of age, or a corporation incorporated and registered in Israel, provided that there is no limitation on the liability of the shareholders or partners of the corporation;
(2)that person has not been convicted of a criminal offence as detailed in section 226(a) or of a criminal or disciplinary offence that, by reason of its nature, gravity or circumstances, renders that person unfit to receive approval to serve as an external examiner, and no indictment or disciplinary complaint has been filed against that person on suspicion of committing such offences; and if that person is a corporation — the corporation, as well as any office holder or controlling shareholder therein, and every employee who will conduct examinations on behalf of the corporation, have not been convicted of such an offence and no indictment or disciplinary complaint has been filed against them on suspicion of committing such offences;
(3)that person, and if that person is a corporation — the corporation, as well as any office holder or controlling shareholder therein, and every employee who will conduct examinations on behalf of the corporation, are not likely to find themselves, directly or indirectly, in a position of conflict of interest between the performance of their function under this section and another personal interest or another function;
(4)that person has not been declared legally incompetent, no order to open proceedings has been issued against that person and insolvency proceedings in relation to that person are ongoing so long as that person has not been discharged, and if that person is a corporation — no winding-up order has been issued against it either;
(5)that person possesses appropriate expertise and experience.
(b)Engagement with an external examiner shall be carried out in accordance with the provisions under the Duty to Tender Law, 5752-1992.
(c)Approval to serve as an external examiner shall be for a period not exceeding three years; the Registrar of Endowments may extend such approval for additional periods not exceeding three years each, provided that no person shall serve as an external examiner for a period exceeding eight consecutive years; notwithstanding the foregoing, the Registrar of Endowments may extend an external examiner's approval for an additional period not exceeding six months for the purpose of completing an examination commenced before the expiry of the approval period.
(d)An external examiner who has ceased to meet any of the conditions listed in subsection (a), or in respect of whom there exists a ground that prevents that examiner from serving as an external examiner, shall immediately notify the Registrar of Endowments accordingly.
(e)The Registrar of Endowments may, on the Registrar's own initiative or upon a complaint submitted to the Registrar, revoke an approval to serve as an external examiner or suspend it for a period to be determined, after having given the external examiner an opportunity to present arguments, if the Registrar finds that the approval was granted on the basis of false or incorrect information, that any of the conditions listed in subsection (a) has been breached or has ceased to be met, or that other circumstances exist by reason of which that person is unfit or unsuitable to serve as an external examiner.
(f)The Registrar of Endowments shall publish on the Ministry of Justice website the following:
(1)a list of external examiners holding valid approvals;
(2)the dedicated channels for applying to the Registrar for the purpose of investigating complaints about external examiners.
(g)The Minister may prescribe provisions for the implementation of this section, including with respect to —
(1)the education, professional experience and training of external examiners;
(2)circumstances in which an external examiner shall be deemed to be in a position of conflict of interest;
(3)restrictions that shall apply to an external examiner after that examiner has ceased to serve as such.
Demand for Information by an External Examiner§
345x4.
(a)An external examiner may require a public benefit company and any of the following persons to provide any information or document, including an output as defined in the Computers Law, 5755-1995, relating to the affairs of the company, insofar as they are in that person's possession, all as specified in the demand and by the date specified therein:
(1)shareholders of the company;
(2)office holders in the company;
(3)members of the audit committee of the company;
(4)employees of the company;
(5)additional persons prescribed by the Minister as having a connection to the company's activities.
(b)Where the Registrar of Endowments has reasonable ground to believe that a public benefit company has breached a provision of the provisions under this Law applicable to it, the Registrar may instruct the external examiner to demand information and documents as referred to in subsection (a) also from a person who, within the four years preceding the date of the demand, was one of those listed in paragraphs (1) to (4) of that subsection.
(c)An external examiner and every employee acting on that examiner's behalf shall keep confidential all information that came to their knowledge in consequence of or in the course of performing their function, shall not make any use thereof and shall not disclose it to another person, except to the extent necessary for the performance of their function.
(d)The Minister may prescribe provisions for the implementation of this section, including with respect to the manner of retaining information and documents by an external examiner and the periods of retention thereof.
Report to the Knesset on Engagement of External Examiners§
345x5.
The Minister shall report to the Constitution, Law and Justice Committee of the Knesset, once every two years, on the implementation of the provisions of sections 345x2 to 345x4.
345y.§
(Repealed — תש״ע־3)
Application to the Court§
345z.
In any matter under this Law relating to a public benefit company, any person harmed by an act or omission of the company may apply to the court with a request for directions to the company to act in accordance with its purposes or in accordance with the provisions of this Law; the Attorney General may also initiate any proceeding under this Law relating to a public benefit company and appear and argue in such a proceeding if the Attorney General considers that it is in the public interest.
Fees and Payments§
345aa.
The Minister may prescribe a registration fee for entry in the register, as well as other fees and payments to be paid in respect of acts and services provided by the Registrar of Endowments under this Chapter.
Restitution to the Company§
345ab.
(a)Where assets, including moneys, of a public benefit company (in this section — transfer of assets) have been transferred, directly or indirectly, to another person in any of the following circumstances:
(1)in deviation from its purposes that was not approved by the court pursuant to section 345f;
(2)in a transaction contrary to the provisions of section 345l;
(3)by way of distribution of profits to its shareholders or to the promoter of the company contrary to the provisions of this Chapter;
(4)in the course of a voluntary winding-up, contrary to the provisions of this Chapter;
(5)in a public benefit fund as defined in Section B — contrary to the provisions under section 345ar;
the court may, subject to the provisions of subsection (b), upon the application of a donor to the company, a shareholder of the company or the Registrar of Endowments, order that an office holder in the company who knew or ought to have known of the transfer of assets shall restore to the company the assets transferred as aforesaid, or their value, in whole or in part.
(b)The court shall not impose an obligation of restitution on an office holder as referred to in subsection (a) if the office holder proved any of the following:
(1)that that person took all reasonable measures to prevent the transfer of assets;
(2)that that person relied in good faith on information from a person holding a function in the company who was authorised to confirm that the transfer of assets was not as described in paragraphs (1) to (5) of subsection (a);
(3)that that person acted in good faith and that, by reason of the special circumstances of the matter, that person ought not to have known that the transfer of assets was contrary to the provisions of this Chapter.
(c)The court may refrain from ordering any of those listed in subsection (a) to restore the transferred assets or their value, in whole or in part, if the assets or their value have been returned to the company.
(d)The Registrar of Endowments shall not submit an application to the court under this section unless the Registrar has given the office holder notice of the Registrar's intention to submit such an application and has afforded that person the opportunity to present arguments, in writing or orally, within a reasonable time from the date of delivery of the notice, as prescribed; a notice under this subsection shall state, among other things, the following:
(1)particulars of the act or omission by reason of which the Registrar of Endowments intends to apply to the court for the restoration of assets to the company;
(2)the value of the assets that the Registrar of Endowments intends to request be restored;
(3)the right of the office holder to present arguments pursuant to this section, and the deadline set for doing so.
Special Provisions Regarding Lifting the Corporate Veil in a Public Benefit Company§
345ac.
For the purposes of section 6 of this Law —
(1)a public benefit company that has not been registered in the register is presumed to have made use of the separate legal personality with intent to defraud a person; however, it shall be a good defence for the defendant if that person proves that the company acted in accordance with the main provisions of this Law with respect to a public benefit company even if it was not registered, or that the said person knew that it was not registered;
(2)the court may, if it finds that the conditions for attributing a debt of the company as referred to in section 6(a), with the necessary modifications, are met, attribute a debt of a public benefit company to an office holder therein, instead of or in addition to its shareholders, all as it shall determine.
Savings Provisions§
345ad.
(a)The provisions of this Chapter are intended to be in addition to the other provisions of this Law and the provisions of any other law; however, in the event of a conflict, the provisions of this Chapter shall prevail, unless express provisions have been prescribed under another law with respect to a public benefit company; in this subsection, "another law" includes rules, guidelines or approvals of a body authorised to prescribe them in relation to that company, acting by virtue of the other law.
(b)Nothing in the provisions of this Law shall derogate from additional duties applicable to shareholders and office holders in a public benefit company acting as a trustee, by virtue of the Trust Law, insofar as such duties apply.
Prohibition on Derogation by Agreement§
345ae.
The provisions under this Chapter may not be derogated from by agreement.
Application of the Provisions of the Law with Modifications§
345ae1.
The Minister may prescribe that a provision of the provisions of this Chapter shall not apply to categories of public benefit companies to be prescribed, or that it shall apply with modifications to be prescribed.
Application with Respect to Government Companies§
345af.
The Minister and the Minister of Finance may prescribe that the provisions of this Chapter, in whole or in part, shall not apply to a public benefit company that is a government company or a government subsidiary company as defined in the Government Companies Law, 5735-1975 (in this section — a government public benefit company), or that they shall apply to a government public benefit company with modifications to be prescribed.
Application with Respect to Foreign Companies§
345ag.
(a)A foreign company that maintains a place of business in Israel, whose articles prescribe only public purposes and whose articles prohibit the distribution of profits (in this Law — a foreign public benefit company) shall be subject to the provisions of this Law with respect to a public benefit company with the necessary modifications and with such modifications as the Minister may prescribe by regulations.
(b)The Minister may prescribe, by Order, after consultation with the Registrar of Endowments, that the provisions of this Law with respect to a public benefit company shall not apply, in whole or in part, to a particular foreign public benefit company, or shall apply with modifications to be prescribed, if the Minister is satisfied that circumstances exist that justify this, having regard, among other things, to the law of the place of incorporation, to the provisions of the foreign law applicable to its operations in Israel as a foreign public benefit company, to the application of another law in Israel with respect to it, and to the source of the company's assets; the Minister may prescribe by regulations provisions as aforesaid for categories of foreign public benefit companies.
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