Translation Notice — This is an English translation of a Hebrew law and may contain inaccuracies. In any dispute or legal matter, the original Hebrew text as published in Reshumot (ספר החוקים) is the sole authoritative and legally binding version.
Law
Companies Law, 5759-1999
חוק החברות
Section B: Public Benefit Fund
Public Benefit Fund
345ld.
[Amendment: 5774-3]
(a)A public benefit fund is a public benefit company that the Registrar of Endowments has recognized as a public benefit fund pursuant to this Section, and whose articles of association prescribe only purposes that are one or more of the following:
(1)financing the activities of public benefit companies or public endowments registered with the Registrar of Endowments;
(2)financing the activities of associations whose purposes are exclusively public purposes;
(3)financing the activities of an institution of higher education that is a non-profit institution and is one of the following:
(a)an institution recognized pursuant to Section 9 of the Council for Higher Education Law, 5718–1958 (in this Section – the Council for Higher Education Law);
(b)an institution that has received a permit or approval pursuant to Section 21a of the Council for Higher Education Law;
(c)an institution whose degree has been recognized pursuant to Section 28a of the Council for Higher Education Law;
(d)an institution that has received a license pursuant to Sections 25c and 25d of the Council for Higher Education Law, or a temporary license pursuant to Section 25i of that Law;
(4)financing the activities of a health maintenance organization, a government hospital, a hospital owned by a health maintenance organization, a hospital owned by a local authority, or any other hospital that is a corporation and is a public institution within the meaning of Section 9(2) of the Income Tax Ordinance; in this paragraph –
Recognition of a Public Benefit Fund and Types of Funds
345le.
[Amendment: 5774-3]
(a)The Registrar of Endowments may recognize a public benefit company as a public benefit fund (in this Section – a Fund), upon its application, if it has been proven to the Registrar's satisfaction that at the time of recognition it will have liquid equity of at least five million New Shekels, and also that one of the following conditions is met, according to the type of Fund:
(1)with respect to a family public benefit fund (in this Section – a family fund) – the total number of donors to the company, from the date of its registration, does not exceed the number of donors prescribed in Section 345lz(a);
(2)with respect to a privately managed public benefit fund (in this Section – a privately managed fund) – the total number of donors to the company, from the date of its registration, does not exceed the number of donors prescribed in Section 345lz(b);
(3)with respect to a publicly managed public benefit fund (in this Section – a publicly managed fund) – no person holds control over it, including by virtue of an agreement with the company.
(b)In this Section, "liquid equity" – monies or securities listed for trading on a stock exchange.
Updating of Amounts
345lf.
[Amendment: 5774-3]
(a)If the rate of change in the index, from the last index published before January 1 of a given year (in this subsection – the update date), compared to the index of January 2014 or the index at the time of the last update carried out pursuant to this subsection, whichever is later, exceeds 10 percent, the Minister may update the amounts specified in Sections 345lh and 345li on the update date.
(b)The amounts referred to in subsection (a) shall be rounded to the nearest amount that is a multiple of 1,000 New Shekels; notice of the updated amounts shall be published in the Official Gazette.
Provisions Regarding Donations
345lg.
[Amendment: 5774-3]
(a)The total number of donors to a family fund shall not exceed twenty; the count of donors shall not include a donor who has died or a person who is a dependent of a donor.
(b)The total number of donors to a privately managed fund shall not exceed twenty in any fiscal year, and it shall not accept from a single donor donations whose value is less than twenty thousand New Shekels.
(c)The Minister may prescribe provisions regarding the manner of calculating the number of donors of family funds and of privately managed funds, including with respect to the calculation of the number of donors who are relatives or who are related corporations; such provisions may be prescribed for different types of family funds or privately managed funds.
Receipt of an Asset as a Donation
345lh.
[Amendment: 5774-3]
(a)Where a Fund has received an asset as a donation, the following provisions shall apply:
(1)the Fund shall sell the asset within two years from the end of the fiscal year in which the asset was received (in this Section – the initial period), and until its sale the asset shall not be considered part of the value of the Fund's assets for the purpose of the minimum distribution pursuant to Section 345li(a)(1);
(2)(a) the board of directors of the Fund may resolve to extend the initial period by an additional period not exceeding two years (in this Section – the additional period), if it is satisfied that selling the asset during the initial period would materially prejudice the consideration to be received from its sale; the reasons for the resolution shall be set out in the minutes of the discussion;
(b)where the board of directors has resolved to extend the period as aforesaid, for the purpose of calculating the value of the Fund's assets with respect to the minimum distribution pursuant to Section 345li(a)(1), the value of the asset during the additional period shall be deemed to be double the amount of the valuation according to an assessment by a qualified party;
(3)the Fund may transfer the asset, without consideration, to a body that it is entitled to participate in financing, and the value of the asset, according to an assessment by a qualified party, shall be considered part of the minimum distribution pursuant to Section 345li; however, an assessment by a qualified party shall not be required if the Fund would have met the minimum distribution even without the transfer of the asset, or with the approval of the Registrar of Endowments if the Registrar is satisfied that an assessment by a qualified party is not required in the circumstances of the matter.
(b)Assets that were in the possession of a public benefit company prior to its first recognition as a Fund shall be deemed, for the purposes of this Section, to have been donated to the Fund at the time of recognition, and the provisions of this Section shall apply to them from the time of recognition onwards.
(c)The provisions of this Section shall not apply to an asset used by the Fund and required by it for the promotion of its purposes; however, the value of the asset shall be taken into account for the purpose of calculating the value of the Fund's assets with respect to the minimum distribution pursuant to Section 345li(a)(1).
(d)In this Section –
"qualified party" – a person whom the board of directors has found to have the requisite expertise for the purpose of valuing the asset, and in respect of whom one of the following conditions is met:
(1)with respect to an asset that is not real property – eligibility conditions prescribed by the Minister generally or for types of assets, to the extent so prescribed;
(2)with respect to a real property asset – a real property appraiser registered in the register of real property appraisers pursuant to the Real Property Appraisers Law, 5761–2001;
"asset" – excluding monies invested by way of investment in accordance with the provisions of Section 345m.
Methods of Financing by a Public Benefit Fund
345li.
[Amendment: 5774-3]
(a)A Fund shall grant monetary grants in accordance with its articles of association and in accordance with criteria and standards set by the board of directors from time to time, provided that the total monetary grants distributed each year shall not be less than the higher of the following (in this Section – the minimum distribution):
(1)5 percent of the value of the Fund's assets at the end of the preceding fiscal year, or 2 million New Shekels, whichever is lower;
(2)an amount equal to double the amount expended by the Fund on its management in the preceding fiscal year, and if it carried out oversight of the use of funds it distributed in the preceding fiscal year or accompanying the activity for which the financing was provided – an additional amount equal to the amount expended by the Fund for such oversight or accompanying;
(3)with respect to a family fund or a privately managed fund – four hundred thousand New Shekels, and with respect to a publicly managed fund – two hundred thousand New Shekels.
(b)The granting of grants by a Fund to another Fund shall not be considered part of the minimum distribution pursuant to subsection (a).
(c)The board of directors of a Fund may resolve to distribute the Fund's monies beyond the minimum distribution, in other ways, including by way of providing loans on terms more favorable than market terms (in this Section – concessional loans), and to prescribe the criteria for such distribution.
(d)Where a concessional loan, in whole or in part, has been recognized as a bad debt pursuant to an audited financial report of an accountant, the bad debt shall be considered part of the minimum distribution in the fiscal year in which it was recognized as a bad debt or in the year in which the financial report was submitted, at the Fund's discretion.
(e)Notwithstanding the provisions of subsection (a), the Minister may prescribe that Funds or types of Funds may fulfill the minimum distribution also by means of providing concessional loans, as the Minister shall prescribe, provided that the proportion of loans to be included in the minimum distribution shall not exceed 50 percent of the minimum distribution or such other proportion as the Minister shall prescribe.
(f)The Minister may prescribe, with respect to Funds or types of Funds –
(1)different types of loans that the Fund shall be entitled to provide and conditions for their repayment;
(2)additional conditions for loans recognized as bad debts as referred to in subsection (d) to be considered part of the minimum distribution;
(3)provisions regarding the minimum number of bodies as referred to in Section 345ld that a Fund is required to participate in financing in a year;
(4)provisions regarding the Fund's participation in financing bodies as referred to in Section 345ld that are bodies related to the Fund, including with respect to the manner of decision-making regarding such financing and the mechanisms for its approval; for this purpose, "bodies related to the Fund" – including a connection arising from the holding of securities or membership in an association, or a connection arising from the service of common officers or their relatives.
Methods of Investing Surplus Funds in a Public Benefit Fund
345m.
[Amendment: 5774-3]
(a)A Fund shall invest the monies it has not yet distributed (in this Law – surplus funds), in an efficient and optimal manner for the preservation of the Fund and the generation of income, in accordance with the investment methods prescribed in the Third Schedule; however, a family fund may invest the surplus funds in another investment method, provided that it is a prudent and careful method, as required by the circumstances of the matter.
(b)The Minister, with the approval of the Constitution, Law and Justice Committee of the Knesset, may, by Order, amend the Third Schedule.
(c)Nothing in the provisions of this Section shall prevent a Fund from being a shareholder in, or a member of, bodies that it is entitled to participate in financing as referred to in Section 345ld.
Designation of PBC and Fund Type Alongside the Fund's Name
345ma.
[Amendment: 5774-3]
(a)A Fund shall indicate, alongside its name, in every document, signage or publication issued on its behalf, one of the following suffixes, as applicable and in accordance with the recognition granted by the Registrar of Endowments:
(1)"Public Benefit Company – Family Fund" or "PBC – Family Fund";
(2)"Public Benefit Company – Privately Managed Fund" or "PBC – Privately Managed Fund";
(3)"Public Benefit Company – Publicly Managed Fund" or "PBC – Publicly Managed Fund".
(b)Notwithstanding the provisions of subsection (a), a privately managed fund may indicate alongside its name the suffix "Public Benefit Company – Corporate Fund" or "PBC – Corporate Fund" in place of the suffix referred to in that subsection, provided that all of the following conditions are met:
(1)the controlling shareholder of the Fund or the donor who made the largest donation to the Fund is a corporation;
(2)the Registrar of Endowments has approved it to do so, upon its application.
(c)A company that is not a public benefit fund shall not indicate alongside its name the suffix referred to in subsection (a) or (b), and shall not present itself in any other manner as a Fund.
(d)The provisions of Section 345d shall not apply to a Fund.
Obligation to Appoint an Independent Director
345mb.
[Amendment: 5774-3]
(a)In this Section –
"independent director", in a Fund – an individual in respect of whom the following conditions are met:
(1)the audit committee has confirmed that the following eligibility conditions are met in respect of that individual:
(a)the individual is not a relative of a shareholder of the Fund, of a director, or of an officer thereof, and with respect to a publicly managed fund – the individual is also not a relative of a donor thereto;
(b)neither the individual, nor the individual's relative, partner, employer, direct or indirect superior, nor a corporation controlled by the individual, has, at the time of appointment or in the two years preceding the time of appointment, an affiliation with the Fund, with a shareholder thereof, with a director or officer thereof, with a relative of a shareholder, director or officer thereof, or with another corporation, and with respect to a publicly managed fund – there is also no such affiliation with a donor thereto, with the donor's relative, or with a corporation controlled by the donor;
(c)the individual's other roles or occupations do not create or are not likely to create a conflict of interest with the individual's role as a director, and do not impair the individual's ability to serve as a director;
(d)the individual possesses appropriate qualifications or expertise, to the extent prescribed by the Minister;
(2)the individual has not served as a director in that company for more than nine consecutive years, and for this purpose a break in service not exceeding two years shall not be considered as interrupting the continuity of service;
"affiliation" – the existence of employment relations, the existence of business or professional relations in general, or control, as well as serving as an officer; the Minister may prescribe that certain matters, under conditions prescribed, shall not constitute an affiliation;
"another corporation" – a corporation whose controlling party, at the time of appointment or in the two years preceding the time of appointment, is the Fund, a shareholder thereof, or a director thereof;
"donor" – a person who has donated to the Fund donations whose cumulative value exceeds 150,000 New Shekels, or such other amount as prescribed by the Minister, and also the controlling party of a corporation that has made such a donation.
(b)The board of directors of a privately managed fund shall include at least two independent directors.
(c)The board of directors of a publicly managed fund shall include at least two directors; all directors of the Fund shall be independent directors.
(d)A director serving in one Fund shall not be appointed as an independent director in another Fund if, at that same time, a director serving in the other Fund serves as an independent director in the first Fund.
(e)In a Fund in which, at the time of appointment of an independent director, all members of its board of directors are of one gender, the independent director to be appointed shall be of the other gender.
Distribution Criteria and Functions of the Distribution Committee
345mc.
[Amendment: 5774-3]
(a)The board of directors of a Fund shall determine, from time to time, criteria for the distribution of the Fund's monies, by means of granting grants and providing loans and in other ways, in accordance with the provisions of Section 345li.
(b)The board of directors of a Fund shall appoint a distribution committee whose functions are –
(1)to bring before the board of directors its recommendations for the determination of criteria for the distribution of the Fund's monies as referred to in subsection (a);
(2)to decide on the manner of distribution of the Fund's monies in accordance with the criteria determined by the board of directors.
(c)In a privately managed fund and in a publicly managed fund, at least two of the independent directors shall be members of the distribution committee.
Expenses for Managing a Public Benefit Fund
345md.
[Amendment: 5774-3]
The Minister may prescribe provisions regarding the rates or amounts that a Fund is permitted to expend on its management, including on salaries and remuneration, and also for the purpose of overseeing the use of funds distributed pursuant to Section 345li and accompanying the activity for which the financing was provided; such provisions may be prescribed for types of public benefit funds.
Reporting to the Registrar of Endowments
345me.
[Amendment: 5774-3]
(a)Without derogating from other reporting obligations of a Fund under this Law, a Fund shall submit to the Registrar of Endowments, once a year, all of the following:
(1)a list of the criteria according to which it distributed the Fund's monies as referred to in Section 345mg;
(2)a list of the bodies to which it distributed monies as aforesaid, specifying the reasons for the decision, the amount granted to each body, and the conditions under which it was granted;
(3)a report regarding the oversight of the use of funds distributed pursuant to Section 345li, and the accompanying of the activity for which the financing was provided, if it carried out such oversight and accompanying.
(b)A privately managed fund and a publicly managed fund shall publish the lists and reports referred to in subsection (a) on their website.
(c)The Minister may prescribe that a Fund shall submit to the Registrar of Endowments or publish on its website reports or information, in addition to those referred to in subsections (a) and (b).
Publication of Information to the Public
345mf.
[Amendment: 5774-3]
A Fund shall publish on its website, at least once a year, a notice in which it shall detail all of the following:
(1)the means of contacting the Fund;
(2)the manner of submitting applications to receive funds from the Fund in that year, including the forms to be completed and the deadline for submitting applications, which shall be at least 30 days after the date of publication;
(3)the criteria for the distribution of funds by the Fund in that year;
(4)the expected date for the distribution of the Fund's monies in that year.
Obligation to Appoint an Auditing Accountant
345mg.
[Amendment: 5774-3]
A Fund shall appoint an auditing accountant, and the provisions of Sections 154 to 157 and 159 to 175 shall apply in this regard, with the necessary modifications.
Obligation to Appoint an Internal Auditor
345mh.
[Amendment: 5774-3]
The board of directors of a privately managed fund and the board of directors of a publicly managed fund shall appoint, with the consent of the audit committee, an internal auditor, and the provisions of Sections 146(b) to 148 and 150 to 153, as well as the provisions applicable to an internal auditor in a public benefit company, shall apply in this regard, with the necessary modifications.
Audit Committee
345mi.
[Amendment: 5774-3]
The audit committee of a privately managed fund and of a publicly managed fund shall comprise at least three members, and the majority of the committee's members shall be qualified to serve as independent directors as referred to in paragraphs (1)(a) to (c) of the definition of "independent director" in Section 345mb, as applicable.
Inspection of Reports of a Family Public Benefit Fund
345n.
[Amendment: 5774-3]
Documents submitted by a family fund pursuant to this Law to the Registrar of Endowments shall be open for public inspection after the following details have been redacted therefrom, unless the Fund has requested that they not be redacted, in whole or in part:
(1)the names of donors, except for donors that are a foreign political entity as defined in Section 36a of the Associations Law;
(2)the bodies to which the Fund distributed funds pursuant to Section 345li.
Conditioning of a Donation
345na.
[Amendment: 5774-3]
(a)A donor shall not condition the making of a donation to a Fund on its return to the donor or to another person, in whole or in part, upon the dissolution of the company or at any other time.
(b)Notwithstanding the provisions of subsection (a), a donor may condition the making of a donation to a Fund on the basis that if the company is dissolved, the balance of the donation shall be transferred to another Fund or to a body operating for a public purpose to be designated by the donor, provided that the Fund is entitled to participate in financing that body as referred to in Section 345ld.
Merger of Public Benefit Funds
345nb.
[Amendment: 5774-3]
(a)The provisions of Section 345tz shall apply with respect to a Fund; however, a Fund shall only be permitted to merge with another Fund.
(b)In a merger between a family fund and a privately managed fund, the target company shall be the privately managed fund; in a merger between a family fund or a privately managed fund and a publicly managed fund, the target company shall be the publicly managed fund.
Change of Status
345nc.
[Amendment: 5774-3]
(a)A Fund may request the Registrar of Endowments to cancel its recognition or to recognize it as a Fund of a different type, and the provisions of Section 345lh shall apply with respect to the recognition, as applicable, with the necessary modifications.
(b)The Registrar of Endowments shall not make a decision as specified below unless satisfied that, in the circumstances of the matter, it is just and appropriate to do so, having regard to the Fund's purposes, its activities prior to the submission of the application referred to in subsection (a), the number of donors thereto, and the commitments undertaken by the Fund for the purpose of the change in its status:
(1)cancellation of recognition of a Fund;
(2)recognition of a publicly managed fund as a family fund;
(3)recognition of a publicly managed fund as a privately managed fund;
(4)recognition of a privately managed fund as a family fund.
(c)The Registrar of Endowments may, on the Registrar's own initiative, resolve to change the status of a Fund as specified below, after notifying the Fund of the intention to do so and affording it an opportunity to present its arguments in the matter, if the Registrar is satisfied that the Fund received donations in contravention of the provisions of this Section and that, in the circumstances of the matter, it is just and appropriate to do so, having regard to the Fund's purposes and activities:
(1)recognition of a family fund as a privately managed fund;
(2)recognition of a privately managed fund as a publicly managed fund.
(d)The cancellation of recognition or change of status as referred to in this Section shall take effect upon receipt of the notice of the Registrar of Endowments or at such other time as determined by the Registrar.
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