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Government Companies Law, 5735-1975

חוק החברות הממשלתיות, תשל"ה-1975

Published: 1975-07-04Consolidated Hebrew text as of 2026-08-02 · Last amended 2026-07-28✓ Amendment status checked against the Knesset legislation record on 2026-09-29
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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

This English text was translated from the official Hebrew using a range of translation tools, and it undergoes ongoing checks and updates. It is not a certified translation.

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.

Chapter I: General Provisions

Definitions§

1.
(a)In this Law –

"government company" means a company in which more than half of the voting power at its general meetings or the right to appoint more than half of the number of its directors is held by the State, or by the State together with a government company or a government subsidiary;

"competitive-defence government company" means a government company in respect of which all of the following conditions are fulfilled:

(1)the Minister of Defence is one of the Ministers responsible for its affairs under this Law;
(2)the average rate of its annual revenues derived from sales outside Israel, according to the last three annual financial statements prepared on a consolidated basis, is at least forty per cent;
(3)the total of its revenues in each of the years in respect of which the statements referred to in paragraph (2) were submitted exceeds NIS 5,000,000,000;

"government subsidiary" means a company in which more than half of the voting power at its general meetings or the right to appoint more than half of the number of its directors is held by a government company, by a government subsidiary, or by a government company together with a government subsidiary;

"competitive-defence government subsidiary" means a company in which more than half of the voting power at its general meetings or the right to appoint more than half of the number of its directors is held by a competitive-defence government company, by a competitive-defence government subsidiary, or by a competitive-defence government company together with a competitive-defence government subsidiary;

"mixed company" means a company that is not a government company and in which half or less of the voting power at its general meetings or the right to appoint half or less of the number of its directors is held by the State;

"wholly government-owned company" means a company all of whose shares are owned by one of the following: the State; a company all of whose shares are owned by the State; the State together with such a company; the State or such a company together with a local authority;

"Companies Law" means the Companies Law, 5759-1999;

"appointment of a director" includes election at a general meeting of a company in which the State holds the largest proportion of voting rights at the meeting and the State voted in favour of the election, as well as election or determination in any other manner;

"the Ministers" means the Minister of Finance together with the Minister designated under this Law as responsible for the affairs of the company;

"the Committee" means the Finance Committee of the Knesset;

"the Appointments Examination Committee" means the committee established under section 18b;

"the Authority" means the Government Companies Authority established by this Law;

"constitutional documents" means the memorandum of association and articles of association of a company.

"privatisation" means actions the purpose of which is to bring about, at one time or gradually, one of the following:

(1)the cancellation or reduction of the Government's share of the voting power at the general meetings of the company or of its right to appoint directors in the company, or the cancellation or reduction of other Government involvement in the company, all where such actions are capable of converting a government company into a mixed company, or of converting a company into a company to which this Law does not apply, or of bringing about any other material change in the balance of power among the members of the company, or of conferring upon the public or upon a new member of the company 10% or more of the voting power in the company or a right to appoint a director;
(2)a reduction of the Government's share of the share capital of the company by 10% or more;
(3)a material curtailment of the company's activities by means of the transfer of businesses and assets to others;

"the Ministers' Committee" means the Ministers' Committee for Privatisation Affairs referred to in section 59a;

"privatisation decision" means a decision under section 59b;

"company under privatisation" means a company in respect of which the Ministers' Committee has adopted a privatisation decision;

"Companies Ordinance" means the Companies Ordinance [New Version], 5743-1983.

(b)For the purposes of the definitions in subsection (a), it is immaterial whether the shares conferring voting power or the right to appoint directors are held directly or indirectly, through an agent or trustee.

Application of the Companies Ordinance§

2.

Subject to the provisions of this Law, the Companies Ordinance shall apply to a government company, and the terms used in this Law shall bear the meaning ascribed to them in the Companies Ordinance.

Primacy of the Law§

3.

The constitutional documents shall not have the power to derogate from the provisions of this Law.

Guidelines for the Operation of a Government Company§

4.
(a)A government company shall operate according to the business considerations by which a non-government company customarily acts, unless the Government has prescribed for it, with the approval of the Committee, other operating considerations; this provision shall not apply to a government company whose constitutional documents prohibit the distribution of profits.
(b)In a government company one of whose objectives is to supply goods or services to the public not for the purpose of making a profit, the Government may decide that in the pursuit of that objective it shall operate according to the rules that bind a person performing a public function by law.

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Chapter II: Establishment of a Government Company and Conversion of a Company into a Government Company

Establishment of a Government Company§

5.
(a)The establishment of a government company requires a Government decision; the decision shall be adopted on the basis of a proposal by a Minister submitted to the Government together with the opinion of the Authority.
(b)Where the Government has decided to establish a government company, the Minister of Finance shall bring the decision to the attention of the Committee, specifying the sources of financing for investments in the company and attaching the opinion of the Authority.
(c)The Government shall prescribe guidelines according to which proposals for the establishment of government companies shall be examined, and directions for the preparation of the Authority's opinions; such guidelines and directions shall be published in Reshumot (Official Gazette).

Matters for Government Decision§

6.

In a decision to establish a government company, the Government shall determine, inter alia –

(1)the objectives of the company, the structure of its share capital and the rights attached to its shares by class;
(2)the total number of directors and the number of directors on behalf of the State among them;
(3)the Minister who shall be responsible for the affairs of the company.

Registration of the Company§

7.

A company whose constitutional documents indicate that it is a government company shall not be registered unless a certificate of the Authority has been submitted to the Registrar of Companies confirming that the Government has decided to establish the company and that the constitutional documents conform to the Government's decision; where such a certificate has been submitted, the Registrar shall classify the company as a government company.

Conversion of a Company into a Government Company§

8.
(a)A transaction by the State as a result of which a non-government company becomes a government company requires a Government decision, and sections 5 and 6 shall apply with the necessary modifications.
(b)Where the State, a government company or a government subsidiary has acquired, otherwise than by way of a transaction, rights in a non-government company that are capable of converting the company into a government company or into a government subsidiary, the company shall become a government company or a government subsidiary, as the case may be, after six months, unless the Government, the government company or the government subsidiary, as the case may be, has decided within that period to waive those rights or to transfer them; a decision by the government company or the government subsidiary to waive or transfer the rights as aforesaid requires Government approval, which shall be given after the board of directors of the company has been afforded an opportunity to present its position before the Government; in the absence of such a decision, the Government shall, within the said six months, determine the particulars referred to in section 6, and the Minister of Finance shall bring them to the attention of the Committee.
(c)Where a non-government company has become a government company, the Authority shall submit to the Registrar of Companies a certificate confirming this, specifying the Minister responsible for the affairs of the company.

Purchase of Minority Shares§

9.
(a)Where a company has become a government company as referred to in section 8, the State is obliged to purchase the shares of the other shareholders who so desire, except for redeemable preference shares.
(b)Within one month after the company has become a government company, the Authority shall notify the said shareholders, in the manner prescribed for the giving of notices in the constitutional documents of the company, of their right under this section, and within three months of receiving the notice a shareholder may notify the Authority of his desire that the State purchase his shares, in whole or in part; the Ministers may, with the approval of the Committee, extend these time limits.
(c)The price of the shares shall be their value on the eve of the company becoming a government company; in the absence of agreement between the parties, that value shall be determined by a person appointed for that purpose by the President of the District Court in Jerusalem, and the Authority shall notify the shareholder of the determination; the price shall be paid, in the absence of other agreement, at the time of transfer of the shares to the State.
(d)Within fourteen days after the Authority has notified a shareholder of the determination of the value of his shares under subsection (c), the shareholder may retract his notice given under subsection (b).
(e)The provisions of this section shall apply, with the necessary modifications, also where the Government has decided as referred to in section 4(a) or in section 15.

Investments in a Government Company§

10.

The Government shall not invest in a government company except with the approval of the Committee.

Decisions Requiring Government Approval§

11.
(a)Decisions of a government company on the following matters require Government approval:
(1)a change in the objectives of the company;
(2)an increase in the registered share capital;
(3)a change in the rights attached to shares;
(4)an allotment of the company's shares or consent to the transfer of shares where such consent is required under the constitutional documents – where they are capable of bringing about a material change in the balance of power among the members of the company or of conferring upon a new member 10% or more of the nominal value of the share capital or of the voting power in the company, or a right to appoint a director;
(5)the issue of redeemable preference shares;
(6)the issue of bonds convertible into shares, and the conversion into shares of bonds issued without a right of conversion or of a loan received by the company;
(7)the conversion of the company from a company that is not a private company into a private company, or from a private company into a company that is not a private company;
(8)the reorganisation of the company, its voluntary winding-up, a compromise, arrangement or merger with another company;
(9)the establishment of a company, alone or with others, and the acquisition of shares in an existing company, except for the purchase of shares on the stock exchange by a company for which such purchase is among its ordinary activities; where the government company is of the opinion that an act or transaction does not require approval under this paragraph and the Authority disagrees, the act or transaction shall be brought for Government approval; for this purpose –

"company" includes any other corporation, as well as a venture in respect of which the conditions prescribed by the Minister of Finance are fulfilled;

"venture" means an engagement, including the continuation of an engagement, to carry out an economic activity, provided that it is capable of materially affecting the profitability, assets or liabilities of the company;

(9a)a right granted by a company or an undertaking assumed by a company that may serve to restrict, directly or indirectly, the Government, whether in its governmental capacity or in its capacity as a shareholder in the company, including in connection with the implementation of structural changes and privatisation, the promotion of competition and the regulation of the sector in which the company operates; for this purpose, "right or undertaking" includes a right or undertaking whereby an act or omission of the Government, which is not within the control of the company, would confer upon a third party remedies and relief against the company;
(9b)the offer of securities to the public by way of a prospectus, where the Authority is of the opinion that as a result of the publication of the prospectus the State, in its capacity as a controlling shareholder of the company, may be liable for damage caused by a misleading detail that was contained in the prospectus, pursuant to the Securities Law, 5728-1968, and has so notified the company;
(10)action as a shareholder in a government subsidiary on any of the matters referred to in paragraphs (1) to (9b);
(11)an undertaking to perform any of the actions referred to in paragraphs (1) to (10).
(b)Government approval under subsection (a) shall be adopted on the basis of a proposal by the Ministers submitted to the Government together with the opinion of the Authority; the Minister of Finance shall bring the Government's decision to the attention of the Committee; the provisions of section 5(c) shall apply also in relation to the grant of approval under this section.
(c)Where the Government has approved a decision referred to in subsection (a), the Authority shall issue to the company a certificate to that effect; a copy of the certificate shall be submitted to the Registrar of Companies.
(d)A decision referred to in subsection (a) that is required to be registered under the Companies Ordinance shall not be registered by the Registrar of Companies unless a copy of the said certificate has been submitted to him.

Company that has Ceased to be a Government Company§

12.

Where a government company has become a non-government company, the Authority shall submit to the Registrar of Companies a certificate to that effect.

Certificates of the Authority and Appeal§

13.
(a)A certificate of the Authority under sections 7, 8, 11 or 12 shall be prima facie evidence of its contents.
(b)A person who considers himself aggrieved by a certificate of the Authority under section 8 or 12 and claims that a company has not become a government company or that a government company has not become a non-government company, as the case may be, may appeal to the District Court in Jerusalem; the period of appeal and the procedure therein shall be prescribed by Regulations made by the Minister of Justice.

Winding-up of a Government Company§

14.
(a)The Government may bring about the voluntary winding-up of a government company or the sale of shares held by the State therein, if it has found one of the following:
(1)the objectives of the company have been achieved or their achievement is entirely impossible or is not possible economically and efficiently;
(2)the objectives of the company have been assigned to an authority established by law or to another government company;
(3)it is desirable that the objectives of the company be carried out by a body that is not a government company.
(b)A proposal to decide under this section shall be submitted to the Government after consultation with the Authority and with the board of directors of the company concerned.
(c)Where the Authority is of the opinion that, for one of the grounds set out in subsection (a), the winding-up of a government company or the sale of shares held by the State therein should be brought about and no Minister has proposed this to the Government, the Authority shall express its opinion in a reasoned memorandum to the Minister of Finance and to the Government.

Merger of Government Companies§

15.
(a)The Government may bring about the merger of two or more government companies if it has found that their objectives substantially overlap or complement each other, or that they can be achieved more economically or more efficiently by a single company.
(b)The provisions of section 14(b) and (c) shall apply, with the necessary modifications, to this section as well.

Sale of Shares of a Government Subsidiary§

15a.
(a)A decision by a government company to sell shares it holds in its government subsidiary requires Government approval and the approval of the Committee.
(b)Government approval under subsection (a) shall be adopted on the basis of a proposal by the Ministers submitted to the Government together with the opinion of the Authority.
(c)The provisions of this section shall not apply to the sale on the stock exchange of shares listed for trading on the stock exchange, where the total of all shares sold in one financial year on the stock exchange does not exceed 5% of the nominal value of the issued and paid-up shares of the subsidiary and the total consideration in one financial year does not exceed ten million New Israeli Shekels, provided that the sale did not result in the subsidiary ceasing to be a government subsidiary.
(d)The amount referred to in subsection (c) shall be adjusted on 1 April of each year, commencing in the financial year 1990, according to the rate of increase of the Consumer Price Index from the index published for February 1989 to the index most recently published before the date of adjustment.

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LawCorporate & Business

חוק החברות הממשלתיות, תשל"ה-1975

government companies law

state companies law

public companies law

chok hachazerot hamemshaltiyot

government corporations

state enterprises law

public sector companies

Israeli government companies

5735-1975