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.

Ordinance

Companies Ordinance [New Version]

פקודת החברות [נוסח חדש]

Division G: Reduction of Capital

Special Resolution on Reduction of Share Capital

151.

A limited Company having a share capital may, by special resolution and subject to confirmation by the Court, reduce its share capital in any way, and may amend its memorandum accordingly to the extent necessary with respect to the reduction of its share capital and shares, and in particular, and without prejudice to the generality of the said power, may —

(1)extinguish or reduce the liability on any of its shares in respect of share capital not paid up;

(2)cancel any paid-up share capital which is lost or unrepresented by available assets, whether by extinguishing or reducing the liability on any of its shares or not;

(3)pay off any paid-up share capital which is in excess of the wants of the Company, whether by extinguishing or reducing the liability on any of its shares or not, and amend its memorandum accordingly to the extent necessary with respect to the reduction of its share capital and shares —

and may apply to the Court for an Order confirming the reduction.

Special Resolution

152.

(a)Where the proposed reduction of share capital involves either the diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, every creditor of the Company who at a date fixed by the Court is entitled to any debt or claim, the admission of which in a winding up would be admissible, shall be entitled to object to the reduction (hereinafter — a qualified creditor); the Court may also, for any other reason appearing to it to be sufficient, permit a qualified creditor to object to the reduction.

(b)The Court may settle a list of the qualified creditors and for that purpose shall, as far as practicable, ascertain without requiring any creditor to make an application for the purpose, the names of such creditors and the nature and amount of their debts or claims; the Court may publish notices fixing a day or days within which creditors not on the list may claim to be included thereon or be excluded from the right of objecting to the reduction.

(c)The Court may dispense with the consent of a creditor on the list whose debt or claim has not been paid or secured if the Company has, in a manner directed by the Court, appropriated for the payment of the debt an amount not less than one of the following:

(1)the full amount of the creditor's debt, whether admitted by the Company or not;

(2)an amount fixed by the Court after inquiry and adjudication as if the Company were being wound up by the Court — where the Company does not admit the full amount of the debt, or the amount is contingent or unascertained.

(d)Where an application is made to confirm a reduction of capital to which this Section may apply, the Court may direct, if it thinks fit to do so in the special circumstances of the case, that a particular class of creditors shall not be subject to this Section in relation to the proposed reduction, and if so directed the consent of such creditors shall not be required for the reduction.

Objection

153.

An officer of a Company who wilfully conceals the name of a qualified creditor, or wilfully misrepresents the nature or amount of the debt of a creditor, or who aids, abets or is privy to any such concealment or misrepresentation as aforesaid, shall be liable to Imprisonment of six months.

Concealment and Misrepresentation

154.

Where the court is satisfied that every qualifying creditor has agreed to the reduction, or that his debt has been discharged, settled, or secured, it may issue an Order confirming the reduction on such terms as it thinks fit to prescribe.

As part of the name

|49(2)|]

The Word "and Reducing"

155.

Where the court has issued an Order confirming a reduction of capital, it may, if it sees special reason to do so, direct that throughout a period commencing on the date of the Order or on a later date as specified in the Order, the Company shall add to its name, at the end thereof, the word "and Reducing", and until the expiry of that period that word shall be deemed to form part of the Company's name.

for the reduction

531|]

Publication of Reasons

156.

Where share capital is being reduced, the court may require the Company — for the purpose of bringing the appropriate information to the public — to publish, in such manner as it directs, the reasons for the reduction or any other information relevant thereto, and also, if it thinks fit, the causes that led to the reduction.

and the publication

Registration of the Order

157.

(a)Where a copy, certified by the court, of the Order confirming the reduction of capital and of a minute showing the share capital as altered by the Order, the number of shares into which it is to be divided, the amount of each share, and the amount deemed at the date of registration to have been paid up thereon, has been delivered to the Registrar — the Registrar shall register the Order and the minute.

(b)The resolution for reduction of capital as confirmed by the Order shall not take effect until registration thereof.

(c)Notice of the registration shall be published in such manner as the court has directed.

(d)The Registrar shall certify under his hand the registration of the Order and the minute, and that certificate shall be conclusive evidence that all the requirements of this Ordinance with respect to the reduction of capital have been complied with, and that the share capital of the Company is as stated in the minute.

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Part of the Memorandum

preamble-14.

1511]

158.

(a)Once the minute has been registered, it shall be deemed to take the place of the corresponding part of the Company's memorandum, and shall be valid and alterable as if it had been originally contained in the memorandum, and shall be included in every copy of the memorandum issued thereafter.

(b)A Company that has contravened a provision of this section, and every officer thereof who knowingly and wilfully authorised or permitted the contravention, shall be liable to a Fine in respect of each copy in relation to which the offence was committed.

of a member

after reduction

Liability of Members

159.

A member or former member of the Company shall not be liable, in respect of a call or contribution, for any amount exceeding the difference between the amount paid up, or reduced and deemed to have been paid up, on the share and the amount of the share as fixed by the minute.

Members in respect of

reduced shares

(2)1]

Liability of Members

160.

(a)Where a qualifying creditor was not entered on the list of creditors by reason of his not having had notice or knowledge of the reduction proceedings or their effect in relation to his debt, and after the reduction the Company is unable, under the provisions of this Ordinance relating to winding up by the court, to pay the amount of his debt — every person who was a member of the Company on the date of registration of the Order and the minute shall be liable to contribute to the payment of that debt an amount not exceeding the amount he would have been liable to contribute had the Company's winding up commenced on the day preceding the registration; and if the Company has been wound up, the court may, on the application of such a creditor and after proof of his claim of ignorance, settle a list of persons liable to contribute as aforesaid and issue calls and Orders upon them and enforce the same, as if they were contributories in the winding up.

(b)Nothing in Section 159 or in this section shall affect the rights of the contributories among themselves.

795 Book of Laws 37 10th of Elul 5743 19.08.1983

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Division H: Miscellaneous Provisions

161.

(a)Where the capital of a Company, other than a foreign company, is altered pursuant to the provisions of this Ordinance, the amount of the new shares issued, or the amount of the capital altered, shall be denominated in Israeli currency; however, if the Company was registered with a capital denominated in foreign currency prior to the 5th of Iyyar 5689 (15 May 1929), it may denominate any amount of new shares, or any alteration in its capital, in the currency in which its capital is denominated.

(b)Where a Company is registered with all or part of its share capital denominated in foreign currency pursuant to a Permit granted by the Minister under Section 5(4), the Minister may authorise, on such terms as he shall prescribe for each case, that any amount of new shares issued by the Company, or any alteration in its capital, shall be denominated in that currency, provided that the Minister of Finance has certified that the grant of such authorisation is in the public interest.

on alteration of capital

The Currency

162.

An unlimited Company that has a share capital may, upon its resolution to register as a limited Company under this Ordinance, do either or both of the following:

(1)increase the nominal amount of its share capital by increasing the nominal amount of each share, provided that no part of the increased capital shall be capable of being called up except in the event of and for the purposes of the Company being wound up;

(2)provide that a specified portion of its uncalled capital shall not be capable of being called up except in the event of and for the purposes of the Company being wound up.

unlimited

being registered as a

limited Company

Power of Company

163.

A limited Company may, by special resolution, provide that a specified portion of its share capital that has not been called up shall no longer be capable of being called up except in the event of and for the purposes of the Company being wound up.

Restriction on

calls

561]

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Division A: Interpretation

164.

(a)In this Chapter —

"Company" — includes a cooperative society registered under the Cooperative Societies Ordinance;

"Registrar", in relation to a cooperative society — the Registrar of Cooperative Societies.

(b)The provisions of this Chapter shall not apply to the issue of promissory notes or bills of exchange by a Company in the ordinary course of its business even if such instruments are negotiable.

Definitions and application

1201, 140)

Section B: Debentures

165.

A Company may, subject to any restriction in its memorandum, articles, or Regulations, charge by way of debentures, whether individual or in series, its assets — Real Property and movables, present and future, whether in possession or in expectancy, including uncalled share capital, unpaid calls, and goodwill — as security for existing, future, or contingent liabilities; however, debentures in series may not be issued except under an express licence from the Minister of Finance, and a Company holding a Permit under Section 32 shall not issue any debentures except under such a licence.

by debenture

Power to Charge

166.

(a)The amount payable under a debenture, whether individual or in series, shall be secured by a fixed charge over a specific asset, or by a floating charge, or by a charge over uncalled share capital, unpaid calls, book debts, or goodwill, or by a combination of such methods.

by debenture

and description

of charged assets

796 Book of Laws 37 10th of Elul 5743 19.08.1983

(b)Every debenture, whether individual or in series, shall contain a general description of the assets charged as security for the amount payable thereunder and of the nature of the security and the circumstances under which it shall be enforced.

Debentures

Types of Debentures

167.

A debenture, whether individual or in series, may be issued as payable to the registered holder or as payable to bearer.

Debenture

Transfer of Debentures

168.

(a)Notwithstanding anything in its articles, a Company shall not register a transfer of a debenture unless a proper instrument of transfer has been delivered to it, unless the right of the transferee in the debenture has vested in him by operation of law.

(b)Where a document is produced to the Company that constitutes, under the law, sufficient evidence that a grant of probate of a Will or letters of administration of the Estate of a deceased person has been made to a particular person, the Company shall, notwithstanding anything in its articles, accept the document as sufficient evidence of the grant.

over Real Property

Application of Floating Charge

169.

(a)Where a debenture or series of debentures is secured by a floating charge over the assets of the Company and the Company's Real Property has not been excluded therefrom, the charge shall apply also to its Real Property, even if it is not registered in the land registers.

(b)A floating charge does not confer upon the debenture holder priority or preference over a registered mortgagee or a purchaser for value of the Company's Real Property, even if the existence of the floating charge was known to them at the time of the mortgage or sale; however, if the instrument creating the floating charge includes a restriction on the Company's right to create charges, and that restriction was included in the particulars delivered for registration of the floating charge, the floating charge shall have priority over a charge created in contravention of that restriction after the registration of the particulars by the Registrar.

(5741 30]

(c)A floating charge that includes a restriction as referred to in subsection (b), the particulars of which were delivered for registration before the 5th of Adar 5735 (16 February 1975), and notice of the existence of the restriction was submitted to the Registrar before the 10th of Tammuz 5741 (24 June 1981) and was registered in his register of charges — shall have priority over a charge created in contravention of that restriction after the registration of the notice by the Registrar.

and prevention of transactions

1231(4)]

Trust deed

for securing

debentures

Floating Charge

170.

Holders of debentures secured by a floating charge, or their trustees where there is a trust deed, may apply at any time to the court for an Order restraining the person in charge of the land register from registering in the land registers — except by Order of the court — any further charge or sale of Real Property registered at that time in the name of the Company and not excluded from the charged assets; and if the court is satisfied that the security given to the debenture holders has been endangered, or that there are other grounds of equity and justice for acceding to their application, it may grant the Order on such terms as it sees fit as to costs and other matters.

171.

(a)Where debentures are secured by a mortgage over Real Property in Israel, a deed may be drawn up whereby the Real Property is mortgaged to a trustee or trustees for the benefit of the debenture holders from time to time.

(b)A copy of a trust deed for securing an issue of debentures shall be sent to every debenture holder, upon his request, in exchange for such amount as the Company has fixed, not exceeding the amount prescribed by Regulations; if a copy is not sent as requested, the Company and every officer thereof who knowingly authorised or permitted the default shall be liable to a Fine and a continuing Fine, and the court may order that the requested copy be sent to the applicant.

797 Book of Laws 37 10th of Elul 5743 19.08.1983

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