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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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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 C: Economic Rehabilitation Plan

Preparation of an Economic Rehabilitation Plan by the Trustee§
80.

In the economic rehabilitation of a corporation carried out by means of an economic rehabilitation plan, the trustee shall act, in parallel with the operation of the corporation, to prepare the plan and to obtain its approval by the creditors, by the members of the corporation to the extent that their approval is required, and by the court, all in accordance with the provisions of this Section.

Formulation of Proposals for an Economic Rehabilitation Plan§
81.
(a)For the purpose of formulating proposals for an economic rehabilitation plan, the trustee may, inter alia, conduct negotiations with the creditors and with any other interested party in the insolvency proceedings, and may also approach any person with a request to submit a proposal for a plan or publish a public invitation to submit such proposals.
(b)In formulating the proposals for the economic rehabilitation plan, the trustee shall take into account, inter alia, the anticipated claims from the National Insurance Institute in respect of the payment of benefits under Chapter VIII of the National Insurance Law.
Submission of Proposals to the Court§
82.
(a)The trustee shall submit to the court one or more proposals for an economic rehabilitation plan that the trustee has formulated pursuant to section 81, and shall send a copy thereof to the Commissioner.
(b)A proposal for an economic rehabilitation plan shall include all information required for the purpose of reaching a decision in the matter, and shall address, inter alia, the following:
(1)the proposed manner for the continuation of the business activity of the corporation, including the reorganisation of the structure of the corporation, its merger or division, and the dates on which the material actions required for the implementation of the plan are expected to be carried out;
(2)the estimates and data on which the plan is based, and if more than one plan has been proposed — a comparison between the plans;
(3)the proposed consideration for each class of creditors and for the members of the corporation and the waiver of rights that will be required of them, in comparison with the consideration they would have received in the winding up of the corporation or in the alternatives to the rehabilitation plan; the proposed consideration may include arrears supplements, even if accrued after the issuance of the order to open proceedings;
(4)if, in accordance with the proposed plan, rights will remain for the members of the corporation by virtue of their being members of the corporation — the value of the rights that will remain, and in particular the rights that will remain in the hands of a controlling shareholder and the consideration given by the members of the corporation therefor, and the possibility of repaying the debts of the corporation by way of allocating those rights to creditors or by way of selling them to third parties;
(5)if the proposed plan includes a provision whereby the creditors or the corporation will be precluded from suing an office holder in the corporation, an interested party therein as defined in the Companies Law, 5759-1999, or another person (in this paragraph — exemption from liability) — the estimated economic value of the exemption from liability to the best of the trustee's knowledge and the considerations for granting such exemption.
(c)The Minister may prescribe additional particulars to be included in a proposal for an economic rehabilitation plan and documents to be attached thereto.
Bringing a Proposal for an Economic Rehabilitation Plan for Approval by the Creditors and Members of the Corporation§
83.
(a)Where a proposal for an economic rehabilitation plan has been submitted to the court, the court shall direct that it be brought for approval by the creditors.
(b)Where the total assets of the corporation exceed the total of its debts and the proposed consideration for each creditor under the proposal for an economic rehabilitation plan is equal to the full amount of the past debt in which that creditor is a creditor — the court shall direct that it be brought also for approval by the members of the corporation.
(c)Notwithstanding the provisions of subsections (a) and (b), if the court finds that the very act of bringing the proposal for approval by the creditors constitutes harm to the insolvency proceedings, it shall not direct that it be brought for approval by the creditors and members of the corporation.
Class Meetings§
84.
(a)Approval of a proposal for an economic rehabilitation plan shall be given at meetings convened separately for each class of creditors or members of the corporation (in this Section — class meetings), which the trustee shall convene pursuant to a direction of the court; for this purpose, "class" means a group of creditors or members of a corporation who have a common interest with respect to the economic rehabilitation plan, which is materially distinct from the interest of the other creditors or members of the corporation and justifies the holding of a separate meeting.
(a1)Where the National Insurance Institute has submitted a proof of debt arising from the payment of a benefit under Chapter VIII of the National Insurance Law, the National Insurance Institute shall be classified as a separate class meeting under this section for the purpose of approving a proposal for an economic rehabilitation plan.
(b)For the purpose of convening meetings pursuant to this section and voting thereat, the trustee shall determine the right of each creditor or member of the corporation to vote at a meeting and shall determine that person's voting power according to the proportion of the past debt in which that person is a creditor or according to the proportion of that person's rights in the corporation, as the case may be; a determination as aforesaid shall have effect only for the purpose of determining voting power at meetings pursuant to this section.
(c)Where the court has directed that several proposals be brought for approval at meetings, it shall direct the manner of deciding between them at the meetings.
(d)A creditor or member of the corporation shall exercise the right to vote at class meetings in good faith and in the customary manner, and shall refrain from abusing that person's power.
(e)The Minister, with the approval of the Constitution, Law and Justice Committee, shall prescribe provisions regarding the conduct of the proceedings pursuant to this section, including regarding the determination of voting power pursuant to subsection (b) and regarding the manner of voting at the class meetings.
Approval of an Economic Rehabilitation Plan by the Creditors and Members of the Corporation§
85.
(a)A proposal for an economic rehabilitation plan shall be deemed to have been approved by the creditors and members of the corporation if it has been approved at each of the class meetings in accordance with the provisions set out below:
(1)a majority of those voting at that meeting voted in favour of the proposal;
(2)those who voted in favour of the proposal together hold at least three-quarters of the voting power of all those voting at that meeting.
(b)In this section, "those voting" — excludes those who abstained.
Approval of an Economic Rehabilitation Plan by the Court§
86.
(a)Where a proposal for an economic rehabilitation plan has been approved by the creditors and members of the corporation as stated in section 85, the trustee shall bring it for approval by the court.
(b)In coming to approve a proposal for an economic rehabilitation plan, the court shall consider, inter alia, considerations relating to the fairness of the proceedings, and may consider additional considerations, including considerations relating to the employees of the corporation or to the public interest.
Court Approval in the Absence of a Majority in Each of the Class Meetings§
87.

Notwithstanding the provisions of sections 85 and 86(a), the court may approve a proposal for an economic rehabilitation plan even if it was not approved at each of the class meetings by the majority required under section 85, if it is satisfied — where necessary on the basis of a valuation of the corporation submitted by an expert on its behalf or on behalf of the relevant parties — that the proposal is fair and just in relation to each creditor or member of the corporation at a class meeting that did not approve it (in this section — a dissenting meeting), and in particular it is satisfied that the following are met:

(1)if an economic rehabilitation plan is not approved, there will be no option but to wind up the corporation, and the consideration proposed for each creditor or member of the corporation at a dissenting meeting is not lower than the consideration that person would have received in the winding up of the corporation;
(2)the proposal does not guarantee any consideration to the members of the corporation, and in particular does not leave in their hands any asset to which they have a right by virtue of being members of the corporation, without every creditor at a dissenting meeting having been guaranteed consideration equal to the full amount of the past debt in which that creditor is a creditor;
(3)each of the secured creditors at a dissenting meeting has been guaranteed consideration whose value is not lower than the value of the asset charged in that creditor's favour or the total debt for the repayment of which the asset was charged, whichever is lower; such consideration may be given in money or money's worth, in immediate payment or in several payments, provided that means of securing the payments have been determined; for this purpose, "the value of the charged asset" means the market value of the charged asset after the proposal has been approved by the court, less the expenses incurred in preserving or realising the asset, and if the asset is charged in favour of the creditor by way of a floating charge only — less a further deduction of 25% of the value of the asset in accordance with the provisions of section 244.
Limitation on Court Approval of an Economic Rehabilitation Plan§
88.

The court shall not approve a proposal for an economic rehabilitation plan if it is satisfied that the consideration proposed for a creditor who did not support the proposal is lower than the consideration that that creditor would have received in the winding up of the corporation, even if the class meeting to which the creditor belongs approved the proposed plan.

Effect of an Approved Economic Rehabilitation Plan§
89.
(a)An economic rehabilitation plan approved pursuant to this Section is binding on the corporation, the members of the corporation and the creditors.
(b)A corporation may not be exempted from punitive payments within the framework of an economic rehabilitation plan.
Implementation of an Economic Rehabilitation Plan§
90.
(a)The trustee shall act to implement an economic rehabilitation plan approved pursuant to this Section, including to distribute the consideration received within the framework of the plan among the creditors, in accordance with the provisions of the plan.
(b)The court that approved an economic rehabilitation plan is competent to hear a dispute that has arisen regarding the interpretation of the plan or regarding its implementation.
Return of Powers to the Organs and Office Holders of the Corporation§
91.

Where an economic rehabilitation plan has been approved pursuant to this Section, the powers that were transferred to the trustee pursuant to section 43 shall revert to the organs of the corporation and to the office holders therein, in accordance with the provisions of the plan and at the time prescribed therein, unless the court has directed otherwise.

Notice to the Registrar upon Approval of the Economic Rehabilitation Plan§
92.

Immediately upon approval of the economic rehabilitation plan, the trustee shall send a copy thereof to the Registrar.

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Section D: Sale of the Business Activity of a Corporation without an Economic Rehabilitation Plan

Sale of the Business Activity of a Corporation§
93.
(a)The sale of the business activity of a corporation for the purpose of its economic rehabilitation, otherwise than within the framework of an economic rehabilitation plan, requires prior approval from the court; in coming to approve such a sale, the court shall consider, inter alia, considerations relating to the fairness of the proceedings.
(b)Where the sale of the business activity of the corporation has been approved pursuant to subsection (a), the consideration received from the sale shall be distributed in accordance with the provisions of Chapter V: Distribution of the Assets of the Creditors' Fund, of Part 4, unless an economic rehabilitation plan has subsequently been approved.

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Section E: Transition to Winding-Up Proceedings

Cessation of Operation of the Corporation and Transition to Winding-Up Proceedings§
94.
(a)Where the court has directed the operation of the corporation for the purpose of its economic rehabilitation and subsequently finds that there is no reasonable prospect of its economic rehabilitation or that the continued operation of the corporation will cause harm to the creditors, it shall direct by Order the cessation of the operation of the corporation and its winding up.
(b)The court's decision on the cessation of the operation of the corporation and its winding up shall not affect the validity of a contract or transaction into which the trustee entered, a transfer of an asset, or a payment made by the trustee.

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Chapter VIII: Winding Up

Action of the Trustee in Winding Up§

95.

Where an order to open proceedings has been issued and the court has directed the winding up of the corporation (in this Chapter — a corporation in winding up), the trustee shall act as soon as possible to realise the assets of the creditors' fund and to distribute them to the creditors, in accordance with the provisions of Part 4: Creditors' Claims.

The Trustee's Right to Cancel an Existing Contract for which There Is No Ground for Cancellation§

96.

The trustee may cancel an existing contract as defined in section 66 to which the corporation in winding up is a party, in accordance with the provisions of section 67, and in this regard the provisions of sections 69, 70, 73 and 74(a) shall apply, with the necessary modifications.

Operation of the Corporation in Winding Up§

97.
(a)The court may direct the trustee to operate the corporation in winding up, for a period that it directs, to the extent required for the purpose of its winding up or for the purpose of maximising the rate of debt to be repaid to creditors.
(b)The provisions of Section B: Operation of the Corporation, of Chapter VII shall apply to the operation of the corporation in winding up; however, the powers under that Section shall be exercised only to the extent that they are required for the purpose of winding up the corporation and to the degree that they are required for the winding up.

Cessation of Winding Up and Transition to Economic Rehabilitation Proceedings§

98.

Where the court has directed the winding up of the corporation and subsequently finds that there is a reasonable prospect of its economic rehabilitation, that there are means to finance the expenses entailed in the operation of the corporation and that there is no reasonable concern that the operation of the corporation will cause harm to the creditors, it shall direct by Order the cessation of the winding-up proceedings and the operation of the corporation for the purpose of its economic rehabilitation.

Dissolution of a Corporation§

99.
(a)Following the completion of the winding up of the corporation, the court shall direct, by Order, its dissolution; from the date of the issuance of the Order the corporation shall be dissolved.
(b)The court shall direct how to deal with the documents of a corporation that has been dissolved and of the trustee, provided that they are preserved for a period of at least seven years.
(c)Immediately upon the issuance of the dissolution Order, the trustee shall send a copy thereof to the Registrar, and the Registrar shall record the fact of the dissolution in the register; the trustee shall notify the court and the Commissioner of the registration of the dissolution of the corporation.

Cancellation of Dissolution§

100.

The provisions of section 342az of the Companies Law shall apply to the cancellation of the dissolution of a company.

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Part 3: Insolvency Proceedings in respect of an Individual

Chapter I: Application and General Provisions

Application – Part 3§

101.
(a)The provisions of this Part shall apply to insolvency proceedings in respect of a debtor who is an individual (in this Part – the individual).
(b)Insolvency proceedings under this Part shall not be opened in respect of an individual, unless one of the following applies to the individual:
(1)the centre of the individual's life, at the time of submission of the application for an order opening proceedings or at an earlier time, beginning in the six months preceding that time, is in Israel;
(2)at the time of submission of the application for an order opening proceedings, the individual has assets in Israel or carries on business in Israel.

Those Entitled to Submit an Application for an Order Opening Proceedings in respect of an Individual§

102.

The following are entitled to submit an application for an order opening proceedings in respect of an individual:

(1)the individual;
(2)a creditor;
(3)the Attorney General.

The Competent Authority to Hear the Application§

103.
(a)The individual's application for an order opening proceedings shall be submitted to the Official Receiver in accordance with the provisions of Chapter II: Order Opening Proceedings on the Application of an Individual whose Total Debts Exceed NIS 176,923.12.
(b)Notwithstanding the provisions of subsection (a), an application for an order opening proceedings of an individual whose total debts do not exceed NIS 176,923.12 shall be submitted to the Registrar of Execution in accordance with the provisions of Chapter XII: Insolvency Proceedings in respect of an Individual with Low-Amount Debts.
(c)The creditor's application and the Attorney General's application for an order opening proceedings shall be submitted to the court in accordance with the provisions of Chapter III: Order Opening Proceedings on the Application of a Creditor or the Attorney General.

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