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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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Unofficial English translation — for reference only. It may contain errors or omissions and cannot be relied on as a legal text. Only the Hebrew text published in Reshumot is legally binding.More

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Despite these checks, it may contain errors, omissions, or imprecise renderings of legal terminology and cross-references, and it may not yet reflect the latest amendments. It cannot be relied upon as a legal text.

The Hebrew text as published in Reshumot (ספר החוקים) and on the Knesset website is the sole authoritative and legally binding version. In any discrepancy, the Hebrew text prevails.

This translation is provided for informational purposes only and does not constitute legal advice. For use in legal proceedings, request a certified Expert Legal Opinion.

Part 7: Capital of the Company

Chapter I: Securities and Transactions therein

Section A: Freedom of Variation

Freedom of Variation§
285.

A company may have shares, bonds, or other securities, each carrying different rights.

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Section B: Registered Share Capital

Increase of Registered Share Capital§
286.

The general meeting may increase the registered share capital of the company in such classes of shares as it shall determine.

Cancellation of Registered Share Capital§
287.

The general meeting may cancel registered share capital that has not yet been allotted, provided that there is no obligation of the company, including a conditional obligation, to allot the shares.

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Section C: Issuance of Securities

Authority to Issue Shares and Convertibles§
288.
(a)The board of directors may issue or allot shares and other securities convertible into or exercisable for shares, up to the limit of the registered share capital of the company; for this purpose, securities convertible into or exercisable for shares shall be regarded as if they had been converted or exercised at the time of issuance.
(b)The authority of the board of directors as set out in subsection (a) may be delegated as set out in paragraphs (1) or (2) —
(1)to a board committee — the issuance or allotment of securities within the framework of an employee compensation plan or employment or remuneration agreements between the company and its employees, or between the company and employees of an affiliated company whose board of directors has agreed thereto in advance, provided that the issuance or allotment is pursuant to a plan that includes detailed criteria formulated and approved by the board of directors;
(2)to a board committee, the general manager or a person acting in such capacity (in this section — the general manager), or to another person recommended by the general manager — in the allotment of shares consequent upon the exercise or conversion of securities of the company.
Authority to Issue Bonds§
289.
(a)The board of directors may resolve on the issuance of a series of bonds within the scope of its authority to borrow on behalf of the company, and within the limits of that authority.
(b)The provisions of subsection (a) do not derogate from the authority of the general manager, or of a person authorised by the general manager to do so, to borrow on behalf of the company, to issue individual bonds, promissory notes and bills of exchange, within the limits of that person's authority to do so.
Prohibition on Issuing or Allotting a Bearer Security§
289a.

Notwithstanding the provisions of sections 288 and 289, a company shall not issue or allot a bearer security.

Entitlement to Participate in Future Allotments§
290.
(a)In a private company whose issued capital comprises one class of shares, shares shall be offered to each shareholder in proportion to that shareholder's share in the issued share capital; the board of directors may offer to another person the shares that a shareholder refused to purchase or did not respond to an offer to purchase by the final date set for that purpose in the offer, all unless otherwise prescribed in the articles of association.
(b)A company incorporated before the commencement of this Law that expressly excluded in its articles of association regulation 42 of the Second Schedule to the Companies Ordinance, as worded immediately before the commencement of this Law, shall be regarded as having excluded the provisions of subsection (a) in its articles of association.
Allotment Otherwise than for Cash§
291.

A company shall not allot a share the consideration for which, in whole or in part, is not to be paid in cash, unless the consideration for the share has been specified in a written document.

Report on Allotment§
292.

A private company is required, within fourteen days after every allotment of shares, to deliver to the Registrar the following documents:

(1)a report, in the form prescribed by the Minister, setting out the particulars of the allotment;
(2)in an allotment to which section 291 applies — a copy of the document referred to in that section.

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Section D: Transfer of Securities

Transferability§
293.

Every security is presumed to be transferable, in accordance with the provisions of this Law.

Restriction of Transferability§
294.

A company may prescribe in its articles a provision restricting the transferability of shares, subject to such conditions as it may prescribe in its articles.

Joint Owners§
295.

A fraction of a share may not be transferred, but a share may have several joint owners, each of whom is entitled to transfer that person's right, unless that right has been restricted in the articles.

296.§

(Repealed — תשע״ו־2)

297.§

(Repealed — תשע״ו־2)

Purchase on Stock Exchange§
298.

The provisions of section 34 of the Sale Law, 5728-1968, shall apply to a person who purchased a security in trading on a stock exchange, and that person shall be regarded as one who purchased it from a person engaged in the sale of assets of the same kind as the subject-matter of the sale and the sale was in the ordinary course of that person's business.

Amendment of Register§
299.

A company shall amend the registration of ownership of shares in the register of shareholders referred to in section 130(a)(1), in any of the following:

(1)a transfer instrument of the share, signed by both the transferor and the transferee, has been delivered to the company, and the requirements of the articles, if prescribed for that purpose, have been fulfilled;
(2)a court order to correct the register has been delivered to the company;
(3)it has been proved to the company that the conditions prescribed by law for the assignment of the right have been fulfilled;
(4)another condition that, under the articles, is sufficient to register an amendment in the register of shareholders has been fulfilled.
Forced Sale§
300.
(a)A private company may prescribe in its articles that a person who is entitled to shares therein by law, including an executor of a will, an estate administrator, and a trustee in liquidation proceedings or in insolvency proceedings, shall be required to offer to the company or to the other shareholders to purchase the shares to which that person is entitled, in consideration of their fair value, as agreed between the parties, and in the absence of agreement — as determined by a court upon the application of the company or the application of the other shareholders, all subject to the provisions of the articles and the provisions of this Law.
(b)If the fair value of the shares has not been agreed upon and no application has been submitted to the court, the shares shall be registered in the name of the person entitled to them, upon the expiry of ninety days from the date of the offer by the person entitled to the shares.

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Chapter II: Preservation of Capital and Distribution

Section A: Permitted Distribution

Non-Derogation§
301.
(a)A company may make a distribution only pursuant to the provisions of this Chapter; however, a company may undertake in its articles or in a contract not to make a distribution subject to additional restrictions beyond the provisions of this Chapter.
(b)A distribution contrary to the provisions of this Chapter is a prohibited distribution.
Permitted Distribution§
302.
(a)A company may make a distribution out of its profits (hereinafter — the profit test), provided that no reasonable concern exists that the distribution will prevent the company from being able to meet its existing and anticipated obligations as they fall due (hereinafter — the solvency test).
(b)In this section —

"profits", for the purpose of the profit test — the balance of surpluses or surpluses accumulated in the last two years, whichever is the higher, all in accordance with the most recent adjusted financial statements, audited or reviewed, prepared by the company, after deducting prior distributions if not already deducted from the surpluses, provided that the date in respect of which the statements were prepared is not earlier than six months before the date of the distribution;

"adjusted financial statements" means financial statements adjusted to the index or financial statements that replace or will replace them, all in accordance with generally accepted accounting principles;

"surpluses" means amounts included in the equity of a company that originate from its net profit as determined in accordance with generally accepted accounting principles, and also other amounts included in equity in accordance with generally accepted accounting principles that are not share capital or premium, which the Minister has prescribed shall be regarded as surpluses.

(c)The Minister may prescribe provisions concerning presumptions as to a company's compliance with the conditions of the solvency test, and also exemptions or reliefs in respect of the adjustment of financial statements.
Distribution with Court Approval§
303.
(a)The court may, upon the application of a company, authorise it to make a distribution that does not satisfy the profit test, provided that it is satisfied that the solvency test is met.
(b)A company shall notify its creditors of the submission of an application to the court as referred to in subsection (a), in the manner that the Minister shall prescribe.
(c)A creditor may apply to the court and object to the company's application to permit it to make a distribution.
(d)The court may, after having given the creditors who objected an opportunity to be heard, approve the company's application in whole or in part, reject it, or make its approval subject to conditions.
Allotment of Shares Below Nominal Value§
304.
(a)Where a company has resolved to allot shares that have a nominal value, for consideration lower than their nominal value, including bonus shares, it must convert into share capital a portion of its profits, within the meaning thereof in section 302(b), from share premium, or from any other source included in its equity, as referred to in its most recent financial statements, in an amount equal to the difference between the nominal value and the consideration.
(b)The court may, upon the application of a company, authorise it to allot shares for consideration lower than their nominal value, otherwise than as set out in subsection (a), subject to such conditions as it shall prescribe.
Regulations§
305.

The Minister may prescribe provisions for the implementation of this Chapter.

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Section B: Dividend

Right to Dividend or Bonus Shares§
306.
(a)A shareholder has the right to receive a dividend or bonus shares, if the company has so resolved.
(b)Where the company's capital comprises shares of different nominal values, dividend or bonus shares shall be distributed proportionally to the nominal value of each share, unless otherwise prescribed in the articles.
Resolution on Distribution of Dividend§
307.

A company's resolution on the distribution of a dividend shall be adopted by the board of directors of the company; however, a company may prescribe in its articles that the resolution shall be adopted in one of the following manners:

(1)at the general meeting, after the recommendation of the board of directors has been brought before it; the general meeting may accept the recommendation or reduce the amount but not increase it;
(2)by the board of directors of the company, after the general meeting has determined the maximum distribution amount;
(3)in another manner prescribed in the articles, provided that adequate opportunity has been given to the board of directors to determine, before the distribution is made, that the distribution is not a prohibited distribution.

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Section C: Acquisition

Consequences of Acquisition§
308.
(a)Where a company has purchased one of its own shares, it may cancel it; if the company has not cancelled that share, the share shall not confer any rights whatsoever (hereinafter — a dormant share), as long as the dormant share is owned by the company.
(b)Where a company has purchased securities that are convertible into or redeemable for shares of the company, it may cancel them; if the company has not cancelled those securities, the company may resell them, or convert or redeem them into shares; shares that have been so converted or redeemed shall be dormant shares as long as they are owned by the company.
Acquisition by a Controlled Corporation§
309.
(a)A subsidiary or another corporation controlled by the parent company (in this section — the acquiring corporation) may purchase shares of the parent company or securities convertible into or redeemable for shares of the parent company, to the same extent that the parent company is entitled to make a distribution, provided that the board of directors of the subsidiary or the managers of the acquiring corporation have determined that if the purchase of the shares or the securities convertible into or redeemable for shares had been carried out by the parent company, such purchase would have constituted a permitted distribution.
(b)Where a share of a parent company has been purchased by a subsidiary or by the acquiring corporation, the share shall not confer voting rights, as long as the share is owned by the subsidiary or the acquiring corporation.
(c)Where a prohibited distribution has been made, the restitution, as referred to in section 310, shall be made to the subsidiary or the acquiring corporation, and the provision of section 311 shall apply, with the necessary modifications, to the directors of the subsidiary and the managers of the acquiring corporation; however, if the board of directors of the parent company determined that the distribution was permitted, the liability shall apply to the directors of the parent company as set out in section 311.
(d)Notwithstanding the provisions of subsection (a), a purchase by a subsidiary or by the acquiring corporation that is not wholly owned by the parent company constitutes a distribution in an amount equal to the product of the purchase amount and the rate of rights in the capital of the subsidiary or in the capital of the acquiring corporation held by the parent company.
Purchase of Securities Convertible into Shares§
309a.

A purchase of securities convertible into shares shall not be regarded as a distribution, to the extent of the amount presented in the most recent adjusted financial statements as a liability, whether short-term or long-term, in respect of those securities.

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Section D: Prohibited Distribution

Consequences of Prohibited Distribution§
310.
(a)Where a company has made a prohibited distribution, a shareholder shall be required to return to the company what that shareholder received, unless that shareholder did not know and was not required to know that the distribution that was made was prohibited.
(b)A shareholder in a public company who was not a director, general manager or controlling shareholder of the company at the time of the distribution is presumed not to have known and not to have been required to know that a distribution that was made constituted a prohibited distribution.
Liability of Directors for Prohibited Distribution§
311.

Where a prohibited distribution has been made in a company, every person who was a director at the time of the distribution shall be regarded as having thereby breached that person's duties to the company under sections 252, 253 or 254, as the case may be, unless that person proved one of the following:

(1)that that person opposed the prohibited distribution and took all reasonable measures to prevent it;
(2)that that person relied in good faith, in a reasonable reliance, on information which, had it not been misleading, the distribution would have been permitted;
(3)that in the circumstances of the matter, that person did not know and was not required to know of the distribution.

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Section E: Redeemable Securities

Redeemable Securities§
312.
(a)Notwithstanding the provisions of section 302, a company may include in its articles a provision permitting it to issue securities redeemable on such terms as shall be prescribed in that provision (hereinafter — redeemable securities).
(b)Where a company has issued redeemable securities, it may redeem them, and the restrictions prescribed in this Chapter shall not apply to the redemption.
(c)Where a company has issued redeemable securities, it may attach to them the characteristics of shares, including voting rights and the right to participate in profits.
(d)Redeemable securities shall not be regarded as part of the company's equity, whatever their designation, unless the right to their redemption has been restricted to the case of the winding up of the company after discharge of all the company's obligations to its creditors at the time of the winding up; where the right to redemption of the securities has been so restricted, the provisions of this Law shall apply in respect of distribution, notwithstanding the provisions of subsection (b).
Transitional Provisions§
313.

Redeemable shares allotted pursuant to section 141 of the Companies Ordinance, as in force immediately before the commencement of this Law, shall be regarded as part of the company's capital, and may be redeemed subject to the provisions of this Chapter, on the terms and in the manner prescribed in the articles.

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