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Insolvency and Economic Rehabilitation Law, 5778-2018

חוק חדלות פירעון ושיקום כלכלי, תשע"ח-2018

Published: 2018-03-15Consolidated Hebrew text as of 2026-08-02 · Last amended 2026-07-28✓ Amendment status checked against the Knesset legislation record on 2026-09-17
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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

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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.

Section B: Role and Powers of the Trustee

Subordination of the Trustee§
41.

The trustee shall act on behalf of the court and shall be subject to its instructions and directives.

Role of the Trustee§
42.
(a)The role of the trustee is to act for the winding-up of the corporation or to operate the corporation and act for its economic rehabilitation, all in accordance with the order for the opening of proceedings.
(b)Within the framework of his role, the trustee —
(1)shall determine debt claims in accordance with Chapter I: Debt Claims, of Part 4;
(2)shall act for the collection and management of the assets of the creditors' fund in accordance with Chapter III: Collection and Management of the Assets of the Creditors' Fund, of Part 4;
(3)if the court has directed that the corporation be operated for the purpose of its economic rehabilitation — shall formulate the optimal course for its rehabilitation, as set out in section 58, and shall act to implement it;
(4)if the court has directed the winding-up of the corporation — shall act to realise the assets of the creditors' fund in accordance with Chapter IV: Realisation of the Assets of the Creditors' Fund, of Part 4, and to distribute them among the creditors in accordance with Chapter V: Distribution of the Assets of the Creditors' Fund, of Part 4.
Conveyance of the Powers of Organs and Office Holders to the Trustee§
43.

Upon the appointment of the trustee, the powers vested in the organs of the corporation and in the office holders therein shall pass to him, and he shall exercise them to the extent required for the performance of his role.

Powers Whose Exercise Requires the Approval of the Court§
44.
(a)The trustee shall exercise the powers listed below only with the approval of the court:
(1)bringing or defending legal proceedings in the name of the corporation;
(2)engaging a person to assist the trustee in the management of the insolvency proceedings;
(3)repayment of a past debt to creditors of a particular class;
(4)a compromise with a creditor or debtor of the corporation regarding the amount of the debt and the manner of its payment, which has a material effect on the scope of the assets of the creditors' fund;
(5)any other power requiring the approval of the court under this Law or under the directives of the court.
(b)The approval of the court referred to in subsection (a) may be given generally or in respect of a particular matter.
Application for Directions§
45.
(a)The trustee may apply to the court for directions on any matter relating to the performance of his role or the exercise of his powers under this Law.
(b)Where an application for directions is capable of affecting the rights of a third party who is neither the corporation nor the trustee, and it does not concern a debt claim submitted under Chapter I: Debt Claims, of Part 4, the application shall be heard by the court if the court finds that all of the following conditions are met:
(1)determination of the matter within the framework of an application for directions is required for the efficient performance of the trustee's role;
(2)the matter does not require complex factual inquiry;
(3)determination of the matter within the framework of an application for directions will not cause material harm to a procedural right of a party.
(c)In an application for directions, the court shall not determine a criminal proceeding or an administrative proceeding.
Cooperation with the Trustee§
46.
(a)Any person who was an office holder in the corporation shall assist the trustee and cooperate with him to the extent required for the performance of the trustee's role.
(b)The trustee may require any person who was an office holder in the corporation to submit to him, within a period that he shall direct, a report on the state of the corporation's affairs; the report shall set out the assets of the corporation, its debts and liabilities, the identifying particulars of the creditors, and any other information that the trustee shall direct, which is required for the performance of his role; the expenses involved in preparing the report, as directed by the trustee, shall be treated as expenses of the insolvency proceedings.
Demand for Assets and Documents of the Corporation§
47.
(a)The trustee may require any person to transfer to him an asset or document in that person's possession which, in the trustee's opinion, the corporation is entitled to receive, and that person shall transfer them to the trustee by the date specified in the demand.
(b)Where a person has a right of lien over an asset or document referred to in subsection (a), the asset or document shall be delivered if the court so directs under section 254.
(c)A dispute regarding the corporation's right in an asset or document that the trustee has demanded be transferred to him shall be determined in accordance with the provisions of section 45(b).
Examination of Assets of the Corporation Held by Another§
48.

Where an asset of the corporation is held by another person, the trustee may examine the asset, after having given that person notice of his intention to do so.

Demand for Information§
49.

For the purpose of performing his role, the trustee may demand any information relating to the affairs of the corporation which the corporation or an office holder therein was entitled to receive.

Information from a Banking Corporation and from the Tax Authority§
50.
(a)Notwithstanding anything provided in any law, the court, on the application of the trustee, may direct a banking corporation or the Tax Authority to provide the trustee with information as detailed below, even if the conditions set out in section 49 are not met, if it is satisfied that the provision of the information is required to assist him in ascertaining the financial position of the corporation, and that the benefit of providing the information outweighs the harm to the privacy of another person:
(1)in relation to a banking corporation — information concerning the assets, debts and transactions of the corporation, as the court shall direct;
(2)in relation to the Tax Authority — information concerning the assets of the corporation.
(b)The court shall direct the provision of information from the Tax Authority under this section only in special cases and for reasons that shall be recorded, and after it has found that the trustee was unable, by other means and with reasonable effort, to obtain the information required by him and that the provision of the information will not expose the sources of information of the Tax Authority or the methods of its collection, or harm an investigation being conducted by the Tax Authority.
(c)The court may hold the hearing of an application for the provision of information from the Tax Authority in camera, and in special cases — even without the presence of the trustee, and may also determine that the information shall be provided in a manner that prevents the exposure of its sources.
(d)Information that the court has directed to be provided under this section shall be transmitted to the trustee alone, in the manner directed by the court, unless the banking corporation or the Tax Authority has consented to its transmission to the creditors as well.
(e)The Minister and the Minister of Finance may prescribe provisions regarding the manner of providing information from a banking corporation or from the Tax Authority under this section; provisions as aforesaid in relation to a banking corporation shall be prescribed in consultation with the Governor of the Bank of Israel; if no such provisions have been prescribed — the court shall direct the manner of providing the information.
(f)The court shall give directions under this section after having given the banking corporation or the Tax Authority, as the case may be, an opportunity to present their arguments before it.
Power of Investigation§
51.

Where the court has directed under section 281(d) that an investigation as referred to in that section be carried out by the trustee, the power of investigation referred to therein shall vest in the trustee, all subject to the provisions of that section.

Maintenance of Confidentiality§
52.

The trustee and any person acting on his behalf shall not make use of information that came to him in the course of, and by reason of, the performance of his role, and shall not disclose it to another, except to the extent required for the performance of his role or pursuant to an order of a court.

Reports of the Trustee§
53.
(a)The trustee shall submit to the court and to the Official Receiver a periodic report concerning the assets of the creditors' fund, the debt claims that he has approved and pending debt claims, and the actions he has taken within the framework of his role.
(b)The periodic report shall be submitted at least once a year, or at a higher frequency if the court or the Official Receiver has so directed.
(c)The court or the Official Receiver may require the trustee to submit to it an immediate report on a specific event relating to the insolvency proceedings.
(d)The Official Receiver may prescribe provisions regarding the trustee's reports, including provisions regarding the manner of preparing the reports and the particulars to be included therein.
(e)Any interested party in the insolvency proceedings may inspect and copy the trustee's reports; the Official Receiver may prescribe provisions regarding the right of inspection under this subsection.
(f)In preparing the report, the trustee shall have regard to the privacy of those mentioned in the report, and shall refrain from including personal particulars whose disclosure is not necessary for the proceedings.
Application to the Court by a Person Harmed by an Act of the Trustee§
54.

A person who has been harmed or is liable to be harmed by a decision of the trustee or by an act that he has done or intends to do, or by an omission of the trustee, may apply to the court for an order to cancel or amend the decision or the act or to give any other direction that it deems fit.

Termination of the Trustee's Tenure§
55.
(a)The court may terminate the tenure of the trustee, on its own initiative, on the application of the trustee or on the application of an interested party in the insolvency proceedings, if it finds that one of the following applies:
(1)the trustee is not properly performing his role;
(2)the trustee is permanently prevented from performing his role;
(3)a condition that was required for his appointment has ceased to be met by the trustee.
(b)The court's decision to terminate the tenure of the trustee shall be given after it has received the position of the Official Receiver on the matter and after it has given the trustee an opportunity to present his arguments.
(c)Where the position of trustee has become vacant, the court shall appoint another in his place in accordance with the provisions of Section A: Appointment of the Trustee.
Conclusion of the Trustee's Tenure§
56.
(a)Upon the trustee's completion of the performance of his role, he shall submit to the court and to the Official Receiver a summary report of his activities.
(b)Where the court is satisfied, after receiving the position of the Official Receiver, that the trustee has completed the performance of his role, and — if the court has directed the dissolution of the corporation as referred to in section 99 — that the dissolution has been registered in the register, it shall direct the conclusion of the trustee's tenure.
(c)The trustee shall send to the Registrar notice of the conclusion of his tenure.

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Chapter VII: Operation and Economic Rehabilitation of the Corporation

Section A: General

Operation of the Corporation by the Trustee§
57.
(a)Where an order for the opening of proceedings has been made in respect of a corporation and the court has directed its operation (in this Chapter — a corporation in operation), the trustee shall operate the business of the corporation so as to enable the continuation of its existence as an active business until its economic rehabilitation, and the provisions of Section B: Operation of the Corporation shall apply to the operation.
(b)Where the court has directed the temporary operation of the corporation under section 24, it shall determine which provisions under Section B: Operation of the Corporation shall apply to the operation, having regard to the extent of their necessity for the temporary operation.
Courses of Economic Rehabilitation§
58.
(a)Concurrently with the operation of the corporation, the trustee shall act to formulate the courses of its economic rehabilitation.
(b)The economic rehabilitation of a corporation may be effected by means of a plan for economic rehabilitation, by way of a sale of the business activity of the corporation without such a plan, or by a combination thereof.

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Section B: Operation of the Corporation

Sub-section A: Acts and Transactions in the Assets of the Creditors' Fund of a Corporation in Operation

Extraordinary Transactions§
59.

The trustee shall not carry out a transaction in the assets of the creditors' fund of a corporation in operation that is an extraordinary transaction as defined in the Companies Law, 5759-1999, unless the court has approved that the transaction is necessary for the economic rehabilitation of the corporation; such approval may be given in advance in respect of a particular class of transactions.

Restrictions on Creditors with Special Repayment Rights§
60.

Where a corporation is in operation, the restrictions set out in sections 245, 252, 253 and 254 shall apply to the realisation of assets subject to a fixed charge (security interest), the crystallisation of a floating charge (security interest), the delivery of assets over which a right of lien exists, and the taking of possession of assets subject to a retention of title.

Charged Asset and Asset Subject to Retention of Title – Use, Lease and Sale in the Ordinary Course of Business§
61.
(a)The trustee may, in the ordinary course of business of a corporation in operation –
(1)use an asset of the creditors' fund that is an asset subject to a fixed charge (security interest), an asset to which a floating charge (security interest) applies, or an asset subject to a retention of title, or lease it, unless it has been proved to the court that one of the following applies:
(a)the use or lease is not required for the purpose of the economic rehabilitation of the corporation;
(b)following the use or lease, the asset will not be sufficient to ensure adequate protection for the secured creditor or the owner of the asset, and no other means of ensuring such protection have been determined;
(2)sell an asset of the creditors' fund that is an asset to which a floating charge (security interest) applies or an asset subject to a retention of title, including when free of any charge (security interest) or other right, unless it has been proved to the court that what is stated in paragraph (1)(a) or (b) applies;
(3)sell an asset of the creditors' fund that is an asset subject to a fixed charge (security interest), including when free of any charge (security interest) or other right, where one of the following applies:
(a)the secured creditor has consented thereto;
(b)the court has approved the sale after being satisfied that all of the following apply:
(1)the sale is required for the purpose of the economic rehabilitation of the corporation;
(2)the consideration to be received for the asset or any asset to be acquired in exchange for such consideration (in this Sub-section – a substitute asset) is sufficient to ensure adequate protection for the secured creditor, or other means of ensuring such protection have been determined.
(b)Court approval pursuant to subsection (a)(3)(b) may be granted in advance, generally or in respect of categories of charged assets.
Charged Asset and Asset Subject to Retention of Title – Use, Lease and Sale Outside the Ordinary Course of Business§
62.
(a)The trustee may, outside the ordinary course of business of a corporation in operation, use an asset of the creditors' fund that is an asset subject to a fixed charge (security interest), an asset to which a floating charge (security interest) applies, or an asset subject to a retention of title, lease it or sell it, including when free of any charge (security interest) or other right, where one of the following applies:
(1)the creditor or the owner of the asset subject to the retention of title has consented thereto;
(2)the court has approved it after being satisfied that what is stated in paragraphs (1) and (2) of section 61(a)(3)(b) applies.
(b)Nothing in the provisions of this section shall derogate from the requirement for court approval of an exceptional transaction pursuant to section 59.
Payment by Means of a Charged Asset§
63.

Payment by means of a charged asset shall be treated, for the purposes of sections 61 and 62, as a sale.

Tracing of Rights§
64.

Where an asset has been sold pursuant to section 61 or 62 (in this section – the original asset), free of any charge (security interest) or other right, the consideration therefor or the substitute asset, which are capable of identification or tracing, shall be charged in favour of the creditor at the same priority ranking, or shall be treated as assets subject to a retention of title, as the case may be, to the extent required to secure repayment of the secured debt or to secure payment of the consideration for the asset subject to the retention of title; however, the creditor or the owner of the asset shall not be entitled to recover from the substitute asset an amount exceeding the value of the original asset.

New Credit§
65.
(a)The court may permit the trustee to enter into a contract for the receipt of credit required for the purpose of financing the activity of the corporation in operation, or determine a credit framework that the trustee shall be entitled to draw upon for the purpose of financing such activity, all for the purposes and on the terms that the court shall determine (in this section – new credit).
(b)The amounts required for the repayment of new credit shall be treated as insolvency proceedings expenses, unless the court determines otherwise.
(c)Where the court is satisfied that new credit in the required amount cannot be obtained in the circumstances of the matter without its repayment being secured by a charge (security interest) over an uncharged asset of the creditors' fund, or by a subordinate charge (security interest) over a charged asset or an asset subject to a retention of title, it may permit the trustee to draw new credit in an amount it shall determine, the repayment of which shall be secured by such a charge (security interest), provided that the right of the owner of the asset subject to the retention of title to recover from the corporation in respect of non-payment of the consideration shall take priority over the right of the new credit provider.
(d)Where the court is satisfied that new credit in the required amount cannot be obtained in the circumstances of the matter on terms to which the provisions of subsection (c) apply, and that obtaining the credit is essential for the economic rehabilitation of the corporation, it may permit the trustee to draw new credit in an amount it shall determine, the repayment of which shall be secured by a charge (security interest) over an asset of the creditors' fund that is a charged asset or an asset subject to a retention of title, at the same priority ranking as the existing charge (security interest) or the right of the owner of the asset, as the case may be.
(e)The court shall not permit the trustee to draw new credit as referred to in subsection (d) unless, following the charging of the asset pursuant to that subsection, the charged asset or the asset subject to the retention of title, as the case may be, will be sufficient to ensure adequate protection for the secured creditor or the owner of the asset, or other means of ensuring such protection have been determined.
(f)Notice of the trustee's application for new credit shall be given to the creditors of the corporation, as the court shall direct.

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