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
Premium
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.
Sub-section B: Existing Contracts of a Corporation in Operation
Definition of Existing Contract§
66.
In this Sub-section, "existing contract" means a contract to which a corporation in operation is a party, whose date of formation preceded the date of the grant of the order for the opening of proceedings in respect of the corporation and whose performance had not been completed by the parties thereto by that date.
The Trustee's Right to Cancel an Existing Contract for which There Is No Cause for Cancellation§
67.
The trustee may cancel an existing contract, even where there is no cause for its cancellation, with the approval of the court and in accordance with the provisions of this Sub-section.
Restriction on the Right of the Other Party to an Existing Contract to Cancel It§
68.
(a)The other party to an existing contract shall not cancel it on account of its breach by the corporation, except in accordance with the provisions of this Sub-section.
(b)The opening of insolvency proceedings in respect of a corporation, or the corporation's being in insolvency, shall not bring about the cancellation of an existing contract or confer upon the other party to the contract the right to cancel it, even if the contract provides that it shall be cancelled in such circumstances or contains a provision conferring upon the other party to the contract the right to cancel it in such circumstances.
Cancellation of an Existing Contract by Agreement§
69.
The trustee and the other party to an existing contract may agree at any time during insolvency proceedings on the cancellation of an existing contract.
Proceedings for the Cancellation of an Existing Contract for which the Trustee Has No Cause for Cancellation§
70.
(a)Where the trustee seeks to cancel an existing contract for which it has no cause for cancellation, it shall give notice thereof to the other party to the contract.
(b)
(1)If the other party does not agree to the cancellation of the contract within a reasonable time of the trustee's notice as referred to in subsection (a), the trustee may submit to the court an application for approval of the cancellation (in this section – an application for approval of cancellation), provided that the application is submitted within 90 days of the date of the grant of the order for the opening of proceedings in respect of the corporation;
(2)The court may extend the period referred to in paragraph (1) in respect of all the contracts of the corporation, a particular category of contracts, or a particular contract, for additional periods, if it finds that this is justified in view of the complexity of the insolvency proceedings, provided that an application for the extension of the period is submitted within 90 days of the date of the grant of the order for the opening of proceedings, or within the period of extension.
(c)Where the trustee has not submitted to the court an application for approval of the cancellation within the period referred to in subsection (b), it may submit the application at a later date only if circumstances have changed or new facts have come to light that justify doing so.
(d)The court may approve the cancellation of the contract after giving the other party to the contract an opportunity to present its position, if it finds that the cancellation is required for the purpose of the economic rehabilitation of the corporation or will bring about an increase in the rate of debt repaid to creditors; and it may, at the request of the other party to the contract, direct the cancellation of part of the contract only, if it finds that this is sufficient for the purpose of economic rehabilitation or increasing the rate of debt as aforesaid.
(e)Once an existing contract has been cancelled pursuant to this section, all the rights and obligations of the corporation under the contract shall cease from the date of cancellation; however, the cancellation shall not affect the rights and liabilities of any other person except to the extent necessary to release the corporation and its assets from liability.
Proceedings for the Cancellation of an Existing Contract by the Other Party to the Contract§
71.
(a)Where the other party to an existing contract has the right to cancel it on account of its breach by the corporation and seeks to cancel it, that party shall give notice thereof to the trustee.
(b)Where the other party to an existing contract has given the trustee notice as referred to in subsection (a), and the trustee considers that the continued performance of the contract is required for the purpose of the economic rehabilitation of the corporation, the trustee may apply to the court, within 45 days of the date of delivery of the notice, for an order directing the continued performance of the contract pursuant to section 72 (in this section – an application for continued performance of the contract); the court may shorten or extend the said period if it finds that this is justified in the circumstances of the matter.
(c)The trustee is not entitled to submit an application for the continued performance of a contract that is an employment contract, a contract for the provision of personal services, or a contract for the provision of credit, and the court shall not direct its continued performance.
(d)Where the trustee has not submitted to the court an application for continued performance of the contract within the period referred to in subsection (b), the contract shall be cancelled at the expiry of that period.
The Court's Decision on the Trustee's Application for Continued Performance of the Contract and Its Consequences§
72.
(a)Where the trustee has submitted to the court an application for continued performance of the contract pursuant to section 71(b), the court may direct the continued performance of the existing contract by the parties thereto if it is satisfied that the continued performance of the contract is required for the purpose of the economic rehabilitation of the corporation or will bring about an increase in the rate of debt repaid to creditors, and that the corporation will perform its obligations under the contract from the date of the court's decision directing its continued performance onwards; the court may determine means of securing the performance of the obligations under an existing contract as aforesaid, including the provision of a guarantee.
(b)Where the court has directed the continued performance of an existing contract, the contract shall not be cancelled by the other party thereto on account of a prior breach by the corporation; where the court has rejected the trustee's application for continued performance of the contract, the contract shall be cancelled on the date of the court's decision, or on such other date as the court may determine.
Status of Expenses for the Performance of the Corporation's Obligations under an Existing Contract after the Grant of an Order for the Opening of Proceedings§
73.
(a)Where an existing contract has not been cancelled pursuant to the provisions of this Sub-section, including where the court has directed its continued performance pursuant to section 72, the expenses for the performance of the corporation's obligations under the contract, from the date of the grant of the order for the opening of proceedings onwards, shall be treated as insolvency proceedings expenses.
(b)Where an existing contract has been cancelled pursuant to the provisions of this Sub-section, the expenses for the performance of the corporation's obligations under the contract, from the date of the grant of the order for the opening of proceedings until the date of cancellation, shall be treated as a past debt, and if the court finds that this is justified in the circumstances of the matter – as insolvency proceedings expenses.
(c)Notwithstanding the provisions of subsection (b), where the other party to an existing contract has approached the trustee with a request that the trustee notify it whether the trustee intends to act for the cancellation of the contract, or the other party to an existing contract has notified the trustee that it seeks to cancel it as referred to in section 71(a), the expenses for the performance of the corporation's obligations under the contract, from the date of the request or notice as aforesaid until the decision regarding the cancellation of the contract or its continued performance, as the case may be, shall be treated as insolvency proceedings expenses.
Harm due to Breach of an Existing Contract Prior to a Decision on Cancellation or Continued Performance§
74.
(a)Where an existing contract has been cancelled and a person has suffered harm due to the breach of the contract by the corporation that was committed before its cancellation or by reason of the cancellation, that person shall be treated as a creditor of the corporation for the amount of the harm, and that amount shall be regarded as a past debt.
(b)Where the court has directed the continued performance of an existing contract pursuant to section 72 and the other party to the contract has suffered harm due to its breach by the corporation prior to the date of the grant of the order for the opening of proceedings, that party shall be treated as a creditor of the corporation for the amount of the harm, and that amount shall be regarded as a past debt; however, the court may direct that the amount of the harm as aforesaid shall be treated as insolvency proceedings expenses if it is satisfied that the separation of the obligation that was breached before the court's decision from the obligation that was performed after it is unreasonable and unjust in the circumstances of the matter, and that the other party to the contract is performing its obligations under the contract in the period following the grant of the order for the opening of proceedings.
Assignment of Rights and Liabilities under an Existing Contract§
75.
(a)Notwithstanding the provisions of the Assignment of Obligations Law, 5729-1969, and subject to the provisions of sections 61 to 63, the court may approve the assignment of rights and liabilities of a corporation in operation to an assignee that it approves, even if the existing contract contains a provision preventing such an assignment, and in respect of the assignment of a liability – even without the consent of the other party to the contract, provided that the assignment is required for the purpose of the economic rehabilitation of the corporation or for increasing the rate of debt repaid to creditors, and it does not harm the other party to the contract.
(b)The court may determine conditions for an assignment pursuant to this section, including means of securing the performance of the assigned obligations by the assignee, including the provision of a guarantee.
Application to a Contract Cancelled Shortly before the Grant of the Order for the Opening of Proceedings§
76.
The provisions applying pursuant to this Sub-section to an existing contract shall apply, with the necessary modifications, also to a contract to which the corporation in operation was a party that was lawfully cancelled shortly before the date of the grant of the order for the opening of proceedings and whose performance had not been completed by the parties thereto on the date of its cancellation.
Need to cite this law in a foreign court?
Eli Shimony Israeli Attorneys-at-Law provides certified Expert Legal Opinions on Israeli law within 24–48 hours, accepted by courts worldwide.
Contact Us →Sub-section C: Supply of Essential Services and Goods to a Corporation in Operation
Supply of Infrastructure Services§
77.
(a)In this Sub-section –
"existing contract" – as defined in section 66;
"infrastructure supplier" – a person whose occupation is the supply of infrastructure services;
"essential service or goods" – a service or goods required for the continued activity of a corporation in operation, excluding infrastructure services;
"infrastructure services" – the supply of electricity, the supply of water, or other infrastructure services that the Minister has prescribed in consultation with the Minister responsible for regulating activity in the field of that infrastructure and with the approval of the Constitution, Law and Justice Committee.
(b)Where an infrastructure supplier has supplied infrastructure services to a corporation, including pursuant to an existing contract, on the eve of the grant of an order for the opening of proceedings in respect of the corporation, or shortly before that date even if it has ceased to supply them, and the corporation has become a corporation in operation, the infrastructure supplier shall continue to supply the infrastructure services to the corporation.
(c)The supply of infrastructure services as referred to in subsection (b) shall be for consideration, on the payment terms and supply terms that were customary between the parties, or as the court shall direct, all in accordance with the provisions of the law applicable to the payment and supply terms of infrastructure services, provided that the consideration shall not include consideration for infrastructure services supplied to the corporation before the grant of the order for the opening of proceedings.
(d)Notwithstanding the provisions of subsection (b), the court may permit an infrastructure supplier not to supply the infrastructure services to the corporation in operation if it is satisfied that the continued supply thereof is not required for the purpose of the economic rehabilitation of the corporation.
(e)Where consideration in accordance with the provisions of subsection (c) has not been paid to the infrastructure supplier for infrastructure services it supplied to the corporation in operation after the grant of the order for the opening of proceedings, or where the court is satisfied that there is a reasonable concern that the consideration will not be paid in accordance with the provisions of that subsection, the court may determine means of securing payment of the consideration as aforesaid, including the provision of a guarantee, and where no such means exist – may permit the infrastructure supplier not to supply the infrastructure services.
Supply of an Essential Service or Goods§
78.
(a)Where a person has supplied to a corporation an essential service or goods not pursuant to an existing contract, on the eve of the grant of an order for the opening of proceedings in respect of the corporation, or shortly before that date even if it has ceased to supply them, and the corporation has become a corporation in operation, the court may direct that person (in this section – an essential supplier) to continue to supply the essential service or goods to the corporation in operation if all of the following apply:
(1)the continued supply of the essential service or goods is required for the purpose of the economic rehabilitation of the corporation or for increasing the rate of debt repaid to creditors;
(2)in the circumstances of the matter, it is not possible to replace the essential supplier with another supplier immediately and on similar terms, or there is particular difficulty in doing so;
(3)the essential supplier refuses to continue to supply the corporation with the essential service or goods for unjustified reasons, or makes the continued supply conditional on unreasonable terms compared to the terms customary in the market; for this purpose, the following reasons shall be regarded, among others, as unjustified reasons:
(a)the corporation being in financial difficulty;
(b)the existence of insolvency proceedings in respect of the corporation;
(c)non-payment of a past debt by the corporation;
(4)the court is satisfied that the consideration for the supply of the essential service or goods will be paid in accordance with the provisions of subsection (b), and it may determine means of securing payment of the consideration as aforesaid, including the provision of a guarantee.
(b)The supply of the essential service or goods pursuant to subsection (a) shall be for a period directed by the court, not exceeding 60 days from the date of the grant of the order for the opening of proceedings, for consideration, on payment terms and supply terms that were customary between the parties, or as the court shall direct.
(c)The court may from time to time extend the period set out in subsection (b) for a period not exceeding 60 days at a time, if it is satisfied that it is not possible to replace the essential supplier without harming the economic rehabilitation of the corporation or the increase in the rate of debt repaid to creditors, and that the conditions of subsection (a) continue to be met.
Status of Consideration for the Supply of Infrastructure Services or an Essential Service or Goods§
79.
The consideration for the supply of infrastructure services or an essential service or goods pursuant to this Sub-section shall be treated as insolvency proceedings expenses.
Need to cite this law in a foreign court?
Eli Shimony Israeli Attorneys-at-Law provides certified Expert Legal Opinions on Israeli law within 24–48 hours, accepted by courts worldwide.
Contact Us →Read the entire law on one page — continuous text, no page breaks, plus PDF downloads.