Insolvency and Economic Rehabilitation Law, 5778-2018

This Law is intended to regulate the repayment of the debts of a debtor who is an individual or a corporation that is in, or is liable to be in, a state of insolvency, with the aim of –

Insolvency is a financial state in which a debtor is unable to pay the debtor's debts when they fall due, whether or not the date of their repayment has arrived, or in which the debtor's liabilities, including future and contingent liabilities, exceed the value of the debtor's assets.

In this Law –

"organs", of a corporation – organs in a company as defined in the Companies Law, 5759-1999, and any body performing an equivalent role in a partnership;

"court" –

"adequate protection" –

"insolvency proceedings expenses" – as defined in section 233;

"administrative decision" – a decision of an administrative authority in the discharge of its public function under law, including the absence of a decision and also an act or omission;

"collection proceeding" – a proceeding under the Execution Law, under the Fines, Fees and Costs Collection Authority Law, 5755-1995, under the Tax (Collection) Ordinance, or under any other law conferring collection powers equivalent to those conferred in those proceedings;

"administrative proceeding" – a proceeding conducted by an administrative authority in the discharge of its public function under law, and also a proceeding concerning judicial review of an administrative decision;

"insolvency proceedings" – proceedings under this Law commencing at the date of submission of an application for an order opening proceedings until the date set out below, and if the order was cancelled prior thereto – until its cancellation:

"debt arrangement" – as defined in Part 10: Debt Arrangement outside the Framework of an Order Opening Proceedings;

"discharge", in respect of a debtor who is an individual – as defined in Chapter IX: Discharge, of Part 3;

"linkage differentials, interest and arrears supplement" – linkage differentials, interest and arrears supplement added under law or agreement, including arrears fees as defined in the Interest and Linkage Law, 5721-1961;

"stay of proceedings" –

"the Constitution Committee" – the Constitution, Law and Justice Committee of the Knesset;

"member of the corporation" –

"company" – a company and a foreign company as defined in the Companies Law, 5759-1999;

"insolvency" – as defined in section 2;

"debt" – a certain or contingent debt, liquidated or unliquidated, whether or not its date of repayment has arrived;

"preferential debt" – as defined in section 234;

"deferred debt" – as defined in section 237;

"ordinary debt" – as defined in section 235;

"secured debt" – a past debt for the repayment of which an asset of the debtor has been charged (security interest), whether by fixed charge (security interest) or floating charge (security interest), up to the amount of the debt that can be repaid from realisation of the asset;

"past debt" – a debt, including a punitive payment, in respect of which one of the following applies:

"non-dischargeable debts" – as defined in section 175;

"the National Insurance Law" – the National Insurance Law [Consolidated Version], 5755-1995;

"the Execution Law" – the Execution Law, 5727-1967;

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

"the Pledge Law" – the Pledge Law, 5727-1967;

"the Penal Law" – the Penal Law, 5737-1977;

"the Securities Law" – the Securities Law, 5728-1968;

"the Interest and Linkage Law" – the Interest and Linkage Law, 5721-1961;

"debtor" – an individual or corporation that owes a debt;

"the Administrator" – the Administrator of Insolvency and Economic Rehabilitation Proceedings appointed under section 266;

"the Register" –

"trustee" – a person appointed under section 33 or 125;

"office holder" – as defined in the Companies Law, 5759-1999, and in respect of a partnership – any person performing a similar role in the partnership and also a general partner;

"creditor" – a person to whom the debtor owes a debt;

"secured creditor" – as defined in section 243 or 253;

"asset" – movable property, real property or rights;

"asset subject to retention of title" – as defined in section 251;

"assets of the creditors' fund" – as defined in Chapter II: The Creditors' Fund, of Part 4;

"order of repayment" – as defined in section 231;

"the Companies Ordinance" – the Companies Ordinance [New Version], 5743-1983;

"the Bankruptcy Ordinance" – the Bankruptcy Ordinance [New Version], 5740-1980;

"the Partnerships Ordinance" – the Partnerships Ordinance [New Version], 5735-1975;

"order opening proceedings" – as defined in section 3;

"economic rehabilitation order", in respect of a debtor who is an individual – an order containing a plan for the repayment of the debts and economic rehabilitation of an individual in respect of whom an order opening proceedings has been granted, as defined in Chapter VIII: Economic Rehabilitation Order, of Part 3;

"relative" –

"basic interest" – the interest under law or agreement applicable as long as the debtor pays the payments owed by the debtor on time;

"administrative authority" – an authority of the State authorities, a local authority, and also other bodies and persons performing public functions under law;

"the Registrar" – the Registrar of Companies under the Companies Law, 5759-1999, or the Registrar of Partnerships under the Partnerships Ordinance [New Version], 5735-1975, as the case may be;

"partnership" – as defined in the Partnerships Ordinance [New Version], 5735-1975;

"control" – as defined in the Securities Law, 5728-1968;

"floating charge" – as defined in the Companies Ordinance [New Version], 5743-1983;

"fixed charge" – a charge (security interest) that is not a floating charge (security interest);

"economic rehabilitation", of a corporation – preservation of the corporation's business as a going concern;

"arrears supplement" – the portion of interest added under law or agreement on top of the basic interest, which the debtor is required to pay by reason of non-payment of payments owed by the debtor on time, and any arrears fine or similar payment, whatever its designation, by reason of non-payment on time, including arrears fees as defined in the Interest and Linkage Law, 5721-1961;

"corporation" –

"banking corporation" – as defined in the Banking (Licensing) Law, 5741-1981;

"economic rehabilitation plan", in respect of a debtor that is a corporation – a plan for the economic rehabilitation of a corporation in respect of which an order opening proceedings has been granted, as defined in Section C: Economic Rehabilitation Plan, of Chapter VII of Part 2;

"punitive payment" – a fine, monetary sanction and any other payment imposed as a sanction on the debtor by a judicial authority or an administrative authority by reason of a breach of a legislative provision, excluding an arrears supplement added to a non-punitive payment;

"the Minister" – the Minister of Justice.

The following are entitled to submit to the court an application for an order opening proceedings in respect of a corporation:

The Attorney General is entitled to submit an application for an order opening proceedings if the Attorney General finds that there is a public interest in doing so; the provisions of this Part applicable to an application for an order opening proceedings submitted by a creditor shall apply to such an application.

An applicant for an order opening proceedings shall attach to the application an affidavit verifying the facts on which the application is based; the Minister may prescribe additional documents that the applicant must attach to the application for the purpose of fulfilling the conditions for its submission.

Where the court is satisfied that an application for an order opening proceedings was submitted in bad faith, it may order the applicant, within the framework of an award of costs, to pay legal costs or double legal costs, costs for the benefit of the State Treasury, or both.

A hearing of an application for an order opening proceedings and objections submitted thereto shall be held as soon as possible, and the court shall give its decision on the application as soon as possible after the hearing.

Where a corporation requested in an application for an order opening proceedings that an order be made for its operation, as referred to in section 8, and the court considers that the preliminary outline for the economic rehabilitation of the corporation as submitted does not constitute a sufficient economic basis for the grant of an order opening proceedings directing the corporation's operation, the court shall allow the corporation to amend the preliminary outline it submitted or to withdraw its application for the order, within such period as the court shall direct.