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
Chapter IV: Remedies, Financial Sanctions and Registration of a Company as a Non-Compliant Company
Section A: Remedies
Remedies
352.
(a)The laws applicable to breach of contract, with the necessary modifications, shall apply to any breach of a right conferred by this Law upon a shareholder vis-à-vis the Company or vis-à-vis another shareholder, or upon the Company vis-à-vis a shareholder.
(b)Nothing in the provisions of this Section shall derogate from the rights of a shareholder under any law.
Breach of Duties to Maintain Registers and Reports
353.
Without derogating from the provisions of any law, a breach of the duties to maintain registers in a company or to provide notices or reports to the Companies Registrar, which a company is obligated to fulfill under this Law or under the Companies Ordinance, constitutes a breach of a statutory duty toward any person who relied on the registers held by the company or by the Companies Registrar.
Security for Legal Costs
353a.
[Amendment: 2005, 2010-3]
Where an action has been filed with a court by a company or a foreign company in which the liability of the shareholders is limited, the court having jurisdiction to hear the action may, upon application by the defendant, order that the company provide sufficient security for the payment of the defendant's costs should the defendant succeed in the proceedings, and may stay the proceedings until such security is provided, unless the court is of the opinion that the circumstances of the matter do not justify imposing an obligation of security upon the company or the foreign company, or if the company has proven that it has the ability to pay the defendant's costs should the defendant succeed in the proceedings.
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Contact Us →Section B: Imposition of a Financial Penalty by the Registrar
Financial Penalty
354.
[Amendment: 2004, 2007-2, 2011-2, 2011-4, 2016-3, [Subordinate Legislation Notices]]
(a)If the Registrar has reasonable grounds to believe that a private company or a foreign company that is not a reporting corporation has committed any of the following, he may impose upon it a financial penalty in the amount of six thousand New Shekels:
(1)violated an instruction of the Registrar under Section 37(b) or (c);
(1a)failed to pay fees or other payments that it is obligated to pay under Section 44(6);
(2)violated an obligation to submit reports, pursuant to the provisions of Section 140;
(3)violated an obligation to submit an annual report, pursuant to the provisions of Sections 141 or 348;
(4)violated an obligation imposed upon it pursuant to the provisions of Sections 173(a) or 175;
(5)violated an obligation imposed upon it pursuant to the provisions of Section 343.
(b)If the Registrar has reasonable grounds to believe that a company that is a reporting corporation failed to pay fees or other payments that it is obligated to pay under Section 44(6), or violated an obligation imposed upon it pursuant to the provisions of Section 343, he may impose upon it a financial penalty as referred to in subsection (a).
(b1)
(1)If the Registrar has reasonable grounds to believe that a public benefit company has committed any of the following, he may impose upon it a financial penalty as referred to in subsection (a):
(a)violated the obligation to notify the Registrar that a resolution was adopted to amend its articles of association in a manner that would make the company a public benefit company, pursuant to Section 345b(c);
(b)violated the obligation to indicate next to its name the suffix "public benefit company" or "(P.B.C.)", pursuant to the provisions of Section 345d(a);
(c)violated the obligation to submit reports and documents in accordance with the provisions under Sections 345b, 345c, or 345kd;
(d)failed to pay fees or other payments that it is obligated to pay under Section 345kz;
(e)violated an obligation as referred to in Sections 2 or 5a(a) through (c) of the Disclosure Obligations Law (regarding those Supported by a Foreign Political Entity), 5771–2011.
(2)If the Registrar has reasonable grounds to believe that a public benefit company has committed any of the following, he may impose upon it double the financial penalty referred to in subsection (a):
(a)violated the obligation to declare before the Registrar, at the time of submitting the application for its registration, that it is a public benefit company pursuant to Section 345b(a);
(b)violated the obligation to submit to the Registrar of Endowments an application for registration in the register, pursuant to the provisions of Section 345b(g), provided that a financial penalty shall not be imposed on the same company both for failure to make a declaration at the time of registration and for failure to register in the register; however, a financial penalty may be imposed under this subsection, in respect of the same company, if six months have elapsed from the date of imposition of the financial penalty for failure to make a declaration to the Registrar, and the company has not yet been registered in the register;
(c)indicated next to its name the suffix referred to in paragraph (1)(b), or presented itself in any other manner as a public benefit company, even though it is not registered in the register within the meaning of Section 345c, contrary to the provisions of Section 345d(b);
(d)failed to appoint an audit committee contrary to the provisions under Section 345h, or failed to appoint an internal auditor contrary to the provisions under Section 345i;
(e)violated the obligation to notify the Registrar of Endowments of the approval of a non-exceptional transaction as referred to in Section 345yb(a)(3).
(3)If the Registrar has reasonable grounds to believe that a company that is not a public benefit company indicated next to its name the suffix referred to in paragraph (1)(b), or presented itself in any other manner as a public benefit company, contrary to the provisions of Section 345d(b), he may impose upon it double the financial penalty referred to in subsection (a).
(4)If the Registrar has reasonable grounds to believe that a foreign public benefit company violated the obligation to register pursuant to Section 346, he may impose upon it double the financial penalty referred to in subsection (a), provided that a financial penalty shall not be imposed on the same company both for failure to register as a foreign company and for failure to register pursuant to Section 345b(a) or 345b(g); however, a financial penalty for failure to register pursuant to Section 345b(a) or (g) may be imposed in respect of the same company, if six months have elapsed from the date of imposition of the financial penalty for failure to register as a foreign company, and the company has not yet been registered as a foreign public benefit company.
(5)A Magistrate's Court, upon application by a shareholder of the company, a donor to the company, or the Registrar of Endowments, filed after written warning thereof has been given to the respondent, may determine that an office-holder in a public benefit company shall reimburse the company for the financial penalty imposed upon it under this subsection, if the court finds that such office-holder knew or ought to have known of a violation as referred to in paragraphs (1)(a) or (e), (2)(a) or (b), or (3), unless the office-holder proves any of the following:
(a)that he opposed the violation and took all reasonable measures to prevent it;
(b)that he relied in good faith on information provided to him by a person holding a position in the company who was authorized to do so, to the effect that the provisions of the law for which the financial penalty referred to in those paragraphs was imposed had not been violated;
(c)that, due to other special circumstances, he could not have been expected to know of the violation of the provisions of the law;
(d)with respect to paragraphs (1)(a), or (2)(a) or (b) — that the company acted in accordance with all other provisions of the law concerning a public benefit company, even if it was not registered.
(c)If the Registrar has reasonable grounds to believe that a company upon which a financial penalty was imposed violated the same provision for which the financial penalty was imposed, within two years of the date of its imposition, he may impose upon it double the financial penalty referred to in subsection (a) or double the financial penalty referred to in subsection (b1)(2) through (4); he may likewise do so if the company committed three or more violations within the said period, even if the financial penalties were imposed for violations of different provisions.
Update of Financial Penalty
355.
(a)A financial penalty shall be in accordance with its updated amount on the date of the demand for its payment, or, if an appeal was filed and the court hearing the appeal did not order its payment, in accordance with its updated amount on the date of the decision on the appeal.
(b)The Registrar may update the amount of the financial penalty on the first of January of each year, in accordance with the rate of change in the index from the last index published before the update compared to the last index published before the commencement of this Law; the Registrar may also round the amount of the financial penalty to the nearest amount that is a multiple of ten New Shekels.
(c)The Registrar shall publish, by notice in the Official Gazette, the updated amount of the financial penalty.
Demand for Financial Penalty and Its Payment
356.
[Amendment: 2004, 2007-2]
(a)A financial penalty shall be imposed on the company by a demand of the Registrar addressed to the company (in this Chapter — demand); in the demand, the Registrar shall specify the violation as referred to in Section 354 and shall notify the company that if the violation is not remedied within forty-five days from the date of the demand, the company shall be required to pay the financial penalty on the date specified in the demand.
(b)If the company remedied the violation by the date specified in the demand, it shall notify the Registrar accordingly.
(b1)If the Registrar has reasonable grounds to believe that a company upon which a financial penalty was imposed will not remedy the violation by the date specified in the demand, he may, if he gave advance warning thereof in the demand pursuant to subsection (a), impose on the company an additional financial penalty at the rate of one-sixtieth of the financial penalty for each day on which the violation continues, provided that it shall not exceed the amount of 250,000 New Shekels; the provisions of this subsection shall not apply to failure to pay fees or other payments as detailed in Section 354, in subsections (a)(1a) or (b) or (b1).
(b2)Notwithstanding the provisions of subsections (a) through (b1), in respect of violations under paragraphs (1)(a), (2), (3), and (4) of Section 354(b1), the company is not required to be given an opportunity to remedy the violation before the financial penalty is imposed, and the Registrar shall be entitled to impose a financial penalty as aforesaid, which the company shall be required to pay on the date specified in the demand, which shall be no less than thirty days from the date on which the demand was sent, provided that the demand included a notice to the company that it is entitled to submit its arguments within 14 days from the date on which the demand and such notice were sent to it.
(c)If an appeal against the Registrar's decision as referred to in Section 359 was filed, the financial penalty shall not be paid unless the court orders otherwise.
Shekel Interest and Late Payment Fees
357.
[Amendment: 2024]
If the financial penalty was not paid on time, shekel interest and late payment fees shall be added thereto for the period of delay, until its payment, and the provisions of the Interest and Indexation Law shall apply, with the necessary modifications.
Collection
358.
The collection of a financial penalty shall be governed by the Tax Ordinance (Collection).
Appeal
359.
[Amendment: 2010-3, 2024]
(a)A decision of the Registrar under Section 354 concerning a public benefit company may be appealed to the Magistrate's Court, within thirty days from the date of receipt of the demand.
(b)If the financial penalty was paid and the appeal was accepted, the amount paid shall be refunded with the addition of shekel interest, and the provisions of the Interest and Indexation Law shall apply with respect to such interest, with the necessary modifications.
(c)A decision of the court on an appeal may be further appealed with leave.
Collection from a Director
360.
(a)If a financial penalty imposed pursuant to Section 354 was not paid on time, the Registrar may, subject to the provisions of subsection (e), demand its payment from any person registered in the Registrar's records as a director of that company or who was so registered at the time of the violation.
(b)The provisions of Sections 355 through 359 shall apply to a demand under this Section.
(c)If any of those listed in subsection (a) paid the financial penalty, the company shall not be required to pay it, and the person who paid is entitled to restitution from the company.
(d)A court shall not order a person required to pay a financial penalty under this Section to pay it, if such person proved any of the following:
(1)that he took all appropriate measures to prevent the violation;
(2)that he was unaware of the violation and could not have been expected to know of it.
(e)A company may indicate in its annual report that the general manager or a particular director is the person responsible for compliance with the provisions and obligations referred to in Section 354; if the company so indicated, the Registrar shall not demand payment of the financial penalty from another director of the company, unless payment of the financial penalty was first demanded from the general manager or from the director designated by the company and was not paid by them.
Preservation of Criminal Liability
361.
[Amendment: 2024]
(a)Nothing in the provisions of this Section shall derogate from the authority of a prosecutor to file an indictment for an offense under this Law in respect of which a financial penalty may be imposed under this Section, for reasons that shall be recorded; for this purpose, "prosecutor" — as defined in Section 12 of the Criminal Procedure Law [Consolidated Version], 5742–1982.
(b)If an indictment as referred to in subsection (a) was filed against the violator, the violator shall not be required to pay the financial penalty under this Section, and if it was paid — the Registrar shall order the return of the amount paid to the violator, with the addition of shekel interest, and the provisions of the Interest and Indexation Law shall apply with respect to such interest, with the necessary modifications.
Winding Up at the Registrar's Request
362.
[Amendment: 2018]
The Registrar may apply for the winding up of a company pursuant to Chapter B of Part Eight A, if a financial penalty imposed on the company pursuant to Section 354 was not paid by it, and within three years from the date of imposition of the financial penalty the Registrar again imposed an additional financial penalty, which also was not paid on time, provided that neither has been paid up to the date of filing the application for winding up.
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