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 C: Appointment of an Expert to Examine a Debt Arrangement in a Bond Company

Definitions

350jg.

[Amendment: 5772]

In this Section –

"debt arrangement" – a compromise or arrangement within the meaning of Section 350, in a bond company, concerning a material change in the repayment terms of a series of bonds, including a reduction of payment or a deferral of the repayment date, including an arrangement or compromise pursuant to which the bonds, in whole or in part, shall be repaid by way of the allotment of other securities to the bondholders;

"trustee" – a trustee appointed pursuant to Chapter E1 of the Securities Law.

Appointment of an Expert to Examine a Debt Arrangement

350jh.

[Amendment: 5772, 5774-2]

(a)Upon the commencement of negotiations between a bond company and bondholders of a particular series for the purpose of formulating a debt arrangement, the trustee of those bondholders, or if no such trustee has been appointed – the company, shall apply to the court immediately upon the commencement of negotiations, with a request for the appointment of an expert on behalf of the court to examine the debt arrangement (in this Section – the Expert), and the trustee as well as trustees of bondholders of other series shall be entitled to propose candidates for the position of Expert as aforesaid.

(b)Notwithstanding the provisions of subsection (a), the trustee or the company, as the case may be, may refrain from submitting a request for the appointment of an Expert at the initial stage of negotiations, provided that at that stage no reporting obligation pursuant to law applies to the negotiation proceedings, and non-disclosure thereof is justified for the purpose of formulating the arrangement.

(c)Where a request has been submitted pursuant to subsection (a), the court shall appoint an expert on its behalf pursuant to that request, unless it is of the opinion that special circumstances exist, which shall be recorded, by reason of which the appointment of the Expert is not required for the purpose of protecting the interests of the bondholders.

(d)The Expert to be appointed pursuant to this Section shall possess accounting and financial expertise, within the meaning of Section 240(a1), or such other professional qualification as is required for the purpose of fulfilling his functions pursuant to this Law, as well as appropriate experience, all as the Minister shall prescribe; the court shall appoint the Expert after having examined the candidates proposed by the trustees pursuant to subsection (a), if any were proposed.

(e)The court shall not appoint a person as Expert if it finds that his connections with the company, his position in it or vis-à-vis it, or his other occupations, are liable to create a conflict of interest with the performance of his role as Expert.

(f)Where an officeholder has been appointed for a bond company pursuant to the provisions of this Chapter, inter alia for the purpose of formulating a compromise or arrangement between the company and its creditors, no Expert shall be appointed pursuant to this Section, and if an officeholder as aforesaid is appointed after the appointment of the Expert pursuant to this Section – the Expert shall cease to hold office, all unless the court has determined otherwise; nothing in the provisions of this subsection shall derogate from the authority of the court to vest in an officeholder the functions and powers of the Expert pursuant to this Section, with the necessary modifications, or to appoint the Expert as an officeholder.

Functions of the Expert

350ji.

[Amendment: 5772]

The functions of the Expert are:

(1)to provide professional assistance in the conduct of negotiations for the formulation of the debt arrangement, including to give professional advice, by himself or through other experts on his behalf, to the bondholders or to a representative appointed on their behalf, and to provide them with information required for the conduct of the negotiations;

(2)to prepare, in accordance with the court's directions, an opinion regarding the advisability of the debt arrangement for the bondholders (in this Section – the Expert's Opinion); the Expert's Opinion shall be delivered to the court, the company, the trustee and the bondholders, a reasonable time before the convening of the meetings pursuant to Section 350, at a date to be directed by the court;

(3)to examine whether a distribution made by the company during a period determined by the court that preceded the submission of the request to convene meetings pursuant to Section 350, constitutes a prohibited distribution; the findings of such examination shall be delivered to the court, the company, the trustee and the bondholders no later than the date of delivery of the Expert's Opinion.

Functions of the Expert

350k.

[Amendment: 5772]

(a)The Expert's Opinion shall address, inter alia, the alternatives to the proposed debt arrangement and the estimated proceeds that bondholders would receive under each of the alternatives, and in that context the Expert shall examine the alternative of winding up the company and the possibility of selling it to a third party.

(b)If, pursuant to the proposed debt arrangement, shares are to remain in the hands of those who were shareholders of the company on the eve of the arrangement, the Expert's Opinion shall also address the following:

(1)the value of the shares that are to remain as aforesaid and in particular the shares that are to remain in the hands of the controlling shareholder of the company, and the consideration to be given by the shareholders in exchange therefor;

(2)the possibility of repaying the bonds by way of allotting the shares that are to remain as aforesaid to the bondholders or by way of selling them to third parties.

(c)If the proposed debt arrangement includes a provision pursuant to which the bondholders or the company are to be barred from suing an officer of the company, an interested party therein, or another person (in this subsection – release from liability), the Expert's Opinion shall also address the following:

(1)an examination of whether actions or transactions carried out by the person in respect of whom the release is proposed, during the period preceding the date of submission of the request to convene the meetings pursuant to Section 350, give rise to causes of action for the bondholders or the company against him, including a cause of action pursuant to Section 106(c);

(2)the estimated economic value of the release from liability having regard to the findings of the examination pursuant to paragraph (1), and the considerations for granting such release.

(d)If the proposed debt arrangement includes different proceeds for bondholders of different series, the Expert's Opinion shall also address the advisability of the proposed arrangement for each of the series and the fairness of the distribution of proceeds among the bondholders.

(e)If the proposed debt arrangement forms part of a compromise or arrangement within the meaning of Section 350 between the company and other creditors, the Expert's Opinion shall also address the advisability of the arrangement for those creditors, and the provisions of this Section shall apply, with the necessary modifications, unless the court has determined otherwise.

(f)The Minister may prescribe additional matters beyond those set out in this Section to be included in the Expert's Opinion, and may also prescribe provisions regarding its format and the manner of its delivery and the delivery of the examination findings referred to in Section 350יט(3).

Expert's Power to Demand Information

350ka.

[Amendment: 5772]

(a)The company and the trustee shall provide the Expert with any information he demands that is necessary for him for the purpose of fulfilling his functions.

(b)If the company or the trustee is of the opinion that information demanded of it by the Expert is not necessary for him for the purpose of fulfilling his functions, either of them, as the case may be, may apply to the court for an order exempting it from providing the information.

(c)The court may set conditions for the provision of information pursuant to this Section, including prohibiting the provision of the information to the bondholders.

Fees and Expenses

350kb.

[Amendment: 5772]

(a)The court shall determine the Expert's fee, and may authorize the Expert to receive services from other professionals for the purpose of performing his functions, at a cost to be determined by the court.

(b)The Expert's fee and the costs referred to in subsection (a) shall be paid by the company, unless the court has determined otherwise for special reasons that shall be recorded; however, if the debt arrangement forms part of a compromise or arrangement within the meaning of Section 350 between the company and other creditors, the court shall determine who shall bear the fee and the costs.

Convening of Meetings and Approval of a Debt Arrangement

350kc.

[Amendment: 5772]

(a)The court shall not direct the convening of meetings for the approval of a debt arrangement pursuant to Section 350 before it has received the Expert's Opinion and the examination findings pursuant to Section 350יט(3); the date for the convening of the meetings as determined by the court shall be a reasonable time after the delivery of the Expert's Opinion and the examination findings to the company, the trustee, the bondholders and the court.

(b)A debt arrangement shall not be approved except in accordance with the provisions of this Chapter.

Preservation of the Trustee's Powers

350kd.

[Amendment: 5772]

Nothing in the provisions of this Section shall derogate from the powers of the trustee pursuant to any law.

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Section D: Compromise or Arrangement for the Purpose of Restructuring or Merger

Restructuring and Merger

351.

(a)Where an application has been submitted to the court for approval of a compromise or arrangement as referred to in Section 350, and the court is satisfied that the compromise or arrangement was proposed for the purpose of a plan for the restructuring of a company or the merger of companies, and that pursuant to the plan the undertaking or assets of one company (in this Chapter – the transferring company) are to be transferred to another company (in this Chapter – the transferee company), the court may, by the order approving the application or by an order made thereafter, give directions with respect to –

(1)the transfer to the transferee company of the whole or any part of the undertaking, assets, or liabilities of the transferring company;

(2)the allotment or appropriation by the transferee company of any shares, debentures, policies, or like interests in that company which, under the arrangement or compromise, are to be allotted or appropriated by that company to any person;

(3)the continuation by or against the transferee company of any legal proceedings pending by or against the transferring company;

(4)the dissolution of the transferring company without winding up;

(5)the relief to be afforded to persons who dissent from the compromise or arrangement within such time and in such manner as the court may direct;

(6)any incidental, consequential, and supplemental matters that are necessary to secure that the restructuring or merger shall be fully and effectively carried out.

(b)Where an order is made as aforesaid for the transfer of assets or liabilities, the assets shall be transferred by virtue of the order and shall vest in the transferee company, and shall, if the order so directs, be released from any charge whose validity has lapsed by virtue of the compromise or arrangement; and the liabilities shall be transferred to the transferee company and shall become its own liabilities.

(c)Where an order is made pursuant to this Section, every company to which the order applies shall deliver a certified copy thereof to the Registrar within seven days from the date on which it was made; a company that has contravened this provision, and any office holder thereof who approved or permitted the contravention, shall be liable to a fine as referred to in Section 61(c) of the Penal Law, 5737–1977, for each day on which the contravention continues.

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Section E: Application of Provisions to a Foreign Company and Other Corporations

Application of Provisions to a Foreign Company and Other Corporations

351a.

[Amendment: 5778]

(a)The provisions of this Chapter shall apply, mutatis mutandis, to a foreign company that conducts business or holds assets in Israel, even if it has not been registered pursuant to the provisions of Section 346.

(b)Without derogating from the provisions of subsection (a), the Minister may, by Order, apply the provisions of this Chapter to any other specific corporation.

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Chapter IIIA: Striking Off a Company

Definitions

351b.

In this Chapter –

"Objection" – an objection to striking off, as defined in Section 351e(b);

"Company" – a private company that is not a debenture company;

"Debt" – excluding debts arising from fees or other payments that a company is obligated to pay under Section 44(6), or debts that the Registrar has found to have a total value so low as to be insufficient to prevent the striking off of the company, in accordance with criteria to be published by the Registrar pursuant to the provisions of Section 351c(c);

"Asset" – excluding assets that the Registrar has found to have a total value so low as to be insufficient to prevent the striking off of the company, in accordance with criteria to be published by the Registrar pursuant to the provisions of Section 351c(c).

Striking Off a Company

351c.

[Amendment: 5784-2]

(a)The Registrar may strike a company off the Registrar's registers, subject to the provisions of this Chapter, if the Registrar has found that all of the following conditions are met:

(1)the company is not conducting business or any activity;

(2)it has no assets and no debts;

(3)it has been registered for one year as a non-compliant company pursuant to the provisions of Section 362a(b);

(4)for three years it has not paid an annual fee pursuant to Sections 9(b) and 44(6), and has breached its obligation to submit an annual report pursuant to Section 141;

(5)the company's data are not included in the database of the Israel Tax Authority, or the company's file with the Israel Tax Authority is closed.

(b)The provisions of subsection (a) shall apply to a public benefit company, with the following modifications: the striking off requires the consent of the Registrar of Endowments, and the provisions of paragraph (3) of that subsection shall not apply.

(c)The Registrar shall publish criteria with respect to debts and assets of low value as referred to in the definitions of "Debt" and "Asset".

Preliminary Checks

351d.

[Amendment: 5784-2]

(a)Where the conditions set out in paragraphs (3) and (4) of Section 351c(a) have been met with respect to a company, the Registrar may, for the purpose of exercising the Registrar's authority under Section 351c, require, in respect of that company, information capable of indicating whether the remaining conditions set out in Section 351c(a) are met with respect to it; the Registrar may require such information from a banking corporation as defined in the Banking (Licensing) Law, 5741–1981, and from a public body as defined in Section 23 of the Protection of Privacy Law, 5741–1981, including the Israel Tax Authority, the Real Estate Registrar, the Israel Land Authority, the Enforcement and Collection Authority, and the National Insurance Institute.

(b)The Minister may prescribe an obligation to require information or an obligation on the part of the Registrar to conduct additional preliminary checks prior to the publication and dispatch of a notice as referred to in Section 351e(a), and the Minister may also prescribe provisions regarding the provision of information by a banking corporation or a public body as referred to in subsection (a) to the Registrar for the purpose of carrying out the aforementioned checks.

Notice and Objection Prior to Striking Off

351e.

[Amendment: 5784-2]

(a)Where the conditions set out in paragraphs (3) through (5) of Section 351c(a) have been met with respect to a company, and the Registrar has reasonable grounds to believe that the conditions set out in paragraphs (1) and (2) of that subsection are also met with respect to it, the Registrar may publish on the website of the Ministry of Justice a notice of the Registrar's intention to strike the company off the Registrar's registers; such notice shall state that if no objection is filed pursuant to subsections (b) and (c), or if an objection that has been filed is rejected pursuant to subsection (d), the Registrar will strike off the company; where the Registrar has published a notice pursuant to this subsection, the Registrar shall send notice thereof to the company.

(b)Where a notice has been published as referred to in subsection (a), any person who may be adversely affected by the striking off of the company may file an objection to the striking off with the Registrar within 90 days of the date of its publication.

(c)

(1)An objection shall be submitted to the Registrar by means of electronic communication in accordance with the regulations made under Section 44(1) with respect to submission by such means; however, the Registrar may permit the submission of an objection other than by means of electronic communication.

(2)An objection shall include, inter alia, the following:

(a)the particulars of the company in respect of which the objection is being filed;

(b)the particulars of the person filing the objection, including the person's name, identity number, address and digital address, as well as a statement of the person's connection to the company, if any;

(c)a detailed statement of the grounds for the objection.

(d)The Registrar may accept an objection, and may also reject an objection if the Registrar has found that on its face it does not disclose a ground capable of negating the fulfilment of the conditions in Section 351c(a), or that it is unsubstantiated or appears on its face to be vexatious or frivolous; the Registrar shall notify the person who filed the objection of the Registrar's decision on the objection.

(e)Where the Registrar has published a notice pursuant to subsection (a) and no objection has been filed, or an objection that was filed has been rejected, and 90 days have elapsed from the date of publication of the notice, the Registrar may strike the company off the Registrar's registers.

Effect of Striking Off

351f.

[Amendment: 5784-2]

(a)From the date on which a company is struck off as referred to in Section 351e(e) (in this Chapter – the date of striking off), the company shall be deemed to have been dissolved, but this shall not derogate from the possibility of its voluntary winding up pursuant to the provisions of Part Eight A, or from the court's authority to wind it up under any law.

(b)The dissolution of a company following its striking off as referred to in this Chapter shall not derogate from the liability of a shareholder or office holder therein under Sections 192 and 193 or 252 through 254, as the case may be, which accrued before the company was struck off; and if the company continued to carry on activity through its shareholders or office holders even after it was struck off – the dissolution as aforesaid shall not derogate from their obligations under those sections as would have applied had the company not been struck off, and all of the foregoing until its dissolution following winding up under any law.

(c)Where a company has been dissolved following its striking off as referred to in this Chapter, the provision of Section 362a(c)(1)(c)(2) shall continue to apply to any person who was a controlling shareholder therein, as defined in that section, until its dissolution following winding up under any law.

Effect of Striking Off

351f.

[Amendment: 5784-2]

Cancellation of Striking Off by the Registrar

351g.

[Amendment: 5784-2]

(a)

(1)The Registrar may, within one year of the date of striking off, cancel on the Registrar's own initiative the striking off of a company, provided that it has not yet been dissolved following winding up, if the Registrar has found that at the date of striking off the conditions set out in Section 351c(a) were not met with respect to the company.

(2)The Registrar may cancel the striking off of a company, provided that it has not yet been dissolved following winding up, upon the application of any interested person who has been adversely affected by its dissolution following its striking off (in this section – the applicant), if the Registrar has found that at the date of striking off the conditions set out in Section 351c(a) were not met with respect to the company, provided that the application is submitted within one year of the date of striking off; where the applicant is an office holder in the company, or a shareholder in the company or the shareholder's heir, the Registrar may require, as a condition for cancelling the striking off, the payment of an annual fee pursuant to Section 9(b) in respect of the year during which the company was struck off, having regard to the purpose for which the cancellation of the striking off was requested.

(b)Upon the cancellation of the striking off of a company as referred to in subsection (a), the company shall be restored to the Registrar's registers, and shall be deemed to have continued its business and activity and as if it had never been struck off the Registrar's registers.

(c)Where the Registrar considers that in order to determine an application pursuant to subsection (a) a factual inquiry is required or that a direction as referred to in the preamble of Section 351h(a) is needed, the Registrar shall not be required to deal with the application, and may apply to the court for cancellation of the striking off as referred to in Section 351h, or notify the applicant that the Registrar is not required to deal with the application and that the applicant may submit an application for cancellation of the striking off by a court pursuant to Section 351h even if one year has not yet elapsed from the date of striking off.

(d)The Registrar shall notify the applicant as referred to in subsection (c) within 60 days of the date of submission of the application; if the Registrar has not done so, the applicant may apply to the court pursuant to the provisions of Section 351h even if one year has not yet elapsed from the date of striking off.

Cancellation of Striking Off by a Court

351h.

[Amendment: 5784-2]

(a)The competent court as referred to in Section 342e may, upon the application of the Registrar or of any interested person who has been adversely affected by the dissolution of a company following its striking off, order by way of an order the cancellation of the striking off and the restoration of the company to the Registrar's registers, and may give any direction it sees fit in order to place the company and any other person as nearly as possible in the position they would have been in had the company not been struck off, if all of the following conditions are met:

(1)the application is submitted after one year has elapsed from the date of striking off and until the end of 20 years from the date of striking off, unless the court has approved, for special reasons to be recorded, the submission of the application at a later date, and also where the application is submitted before one year has elapsed from the date of striking off in the circumstances referred to in Section 351g(c);

(2)the company has not been dissolved following winding up as referred to in Section 351f(a);

(3)the court has found that at the date of striking off the conditions set out in Section 351c(a) were not met with respect to the company, or has found that for other reasons it is just and proper to grant the application.

(b)Within the scope of the directions that the court may give pursuant to subsection (a), it may, if the circumstances so warrant, give a direction regarding the payment of an annual fee in respect of all or some of the years during which the company was struck off, and regarding the payment of annual fee arrears that accrued in years prior to the striking off, in whole or in part; such a direction shall be given having regard, inter alia, to the purpose for which the cancellation of the striking off was requested, the identity of the applicant, and the time that has elapsed since the striking off.

(c)The provisions of Section 351g(b) shall apply, mutatis mutandis, to the cancellation of a company's striking off as referred to in subsection (a).

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