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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Section E: The Law upon Transition to Insolvency Proceedings
Transition to Insolvency Proceedings§
319ab.
(a)Where a temporary stay of proceedings order has been made in respect of a debtor, and one of the following applies, the provisions of subsection (b) shall apply:
(1)The temporary stay of proceedings order has expired or been cancelled and an order opening proceedings has been made in respect of the debtor following an application for an order submitted before the said expiry or cancellation;
(2)The cancellation of the temporary stay of proceedings order has been deferred under sections 319p(b) or 319z(d) and an order opening proceedings has been made in respect of the debtor following an application for an order submitted during the said period of deferral.
(b)
(1)For the purposes of the insolvency proceedings in respect of the debtor, the date of the grant of the temporary stay of proceedings order shall be deemed to be the date of the grant of the order opening proceedings, and the date of the submission of the application for a temporary stay of proceedings order shall be deemed to be the date of the submission of the application for an order opening proceedings; however, the date for the submission of proofs of debt under section 210(a) shall be within six months from the date of publication of the order opening proceedings;
(2)The expenses of the debt arrangement approval proceedings shall have the same status as the expenses of insolvency proceedings; for the purposes of this paragraph, "expenses of the debt arrangement approval proceedings" means all expenses arising from actions performed by the arrangement administrator in the framework of the proceedings, including his remuneration, and in respect of a debtor who is a corporation or an individual conducting a business — also amounts deemed to be proceedings expenses under section 319k(5), (6) and (9) or under section 319x(9), as the case may be, as well as expenses that the debtor undertook in accordance with the operating plan;
(3)In respect of an individual who submitted an application under Section A of Chapter X of Part 3, Section B of that Chapter shall not apply, in respect of the formulation of a payment arrangement.
Appointment of an Arrangement Administrator as Trustee§
319ac.
(a)An arrangement administrator appointed in proceedings for the approval of a debt arrangement in respect of an individual shall not subsequently be appointed as trustee in insolvency proceedings in respect of that individual.
(b)
(1)Where an arrangement administrator appointed in proceedings for the approval of a debt arrangement in respect of a corporation was appointed from among the candidates recommended by the Official Receiver for the role of arrangement administrator, the court may subsequently appoint him as trustee in insolvency proceedings in respect of that corporation, unless it is satisfied that this would harm the insolvency proceedings; the provisions of Section A of Chapter VI of Part 2 shall apply to the appointment of a trustee as aforesaid, however the Official Receiver's recommendation under section 33(c) of several candidates for the role of trustee shall be given if the court so directs;
(2)An arrangement administrator appointed in proceedings for the approval of a debt arrangement in respect of a corporation who was not appointed from among the candidates recommended by the Official Receiver for the role of arrangement administrator shall not subsequently be appointed as trustee in insolvency proceedings in respect of that corporation; however, the court may appoint him as trustee as aforesaid if it is satisfied that this would assist the insolvency proceedings and would not harm the creditors; should the court so decide, it shall appoint an additional trustee from the list of trustees under section 37, unless it is satisfied that there are special reasons to be recorded justifying the non-appointment of an additional trustee as aforesaid; the provisions of Section A of Chapter VI of Part 2 shall apply to the appointment of trustees as aforesaid.
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Contact Us →Chapter II: Approval of a Debt Arrangement
Force of an Approved Debt Arrangement§
320.
A debt arrangement shall be binding on the debtor and on each of the interested parties therein, even if all the interested parties did not agree to the arrangement, if it was approved by the interested parties by the required majority and also by the court, in accordance with the provisions of this Chapter.
Application to Bring a Debt Arrangement before the Interested Parties for Approval§
321.
(a)A person proposing a debt arrangement who is one of those listed below may submit to the court an application to bring the arrangement before the interested parties therein for approval:
(1)Where the debtor is an individual — the debtor;
(2)Where the debtor is a corporation — the corporation or a member of the corporation, as well as a creditor — if the conditions for submitting an application for an order opening proceedings under section 9 are satisfied in respect of him.
(b)The applicant shall set out in the application all the information required for the purpose of a decision thereon, including the proposed debt arrangement and the benefit that will accrue from its approval, and also, with the necessary modifications, the particulars listed in section 82(b); the Minister, with the approval of the Constitution, Law and Justice Committee, may prescribe additional particulars to be included in the application and documents to be attached thereto that are required by the interested parties for the purpose of reaching a decision regarding the approval of the proposed debt arrangement.
(c)The applicant shall send a copy of the application to the Official Receiver.
Bringing a Debt Arrangement before the Interested Parties for Approval§
322.
(a)Where an application under section 321 has been submitted to the court, it shall direct that the debt arrangement be brought before the creditors for approval.
(b)Where the total assets of a debtor who is a corporation exceed the total of his debts and the debt arrangement proposes to each creditor consideration equal to the full amount of the debt in which he is a creditor — the proposal shall also be brought before the members of the corporation for approval.
(c)Notwithstanding the provisions of subsections (a) and (b), if the court finds that the very act of bringing the debt arrangement before the creditors for approval constitutes harm to the proceedings under this Chapter, it shall not direct that it be brought before the interested parties for approval.
Class Meetings§
323.
(a)Approval of a debt arrangement by the interested parties shall be by meetings held separately for each class of creditors or members of the corporation (in this Chapter – class meetings), in the manner directed by the court; for this purpose, "class" – as defined in section 84(a).
(b)For the purpose of convening meetings under this section and voting thereat, the court shall determine the right of each creditor or member of the corporation to vote at the meeting and shall set that person's voting power according to the proportion of the 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; the court may direct that the procedure by which voting power is determined shall be conducted before the arrangement administrator appointed under section 326; a determination as aforesaid shall have effect solely for the purpose of determining voting power at meetings under this section.
(c)The provisions of section 84(c) to (e) shall apply to class meetings convened under this section, with the necessary modifications.
Approval of a Debt Arrangement by Interested Parties and the Court§
324.
(a)The provisions of sections 85 to 88 shall apply to the approval of a debt arrangement by the interested parties and by the court, with the necessary modifications and subject to the provisions of subsection (b).
(b)Where the debt arrangement is with a debtor who is an individual –
(1)the consideration proposed to a creditor in the debt arrangement shall be examined, for the purposes of sections 87(1) and 88, against the consideration that that creditor would have received had an economic rehabilitation order been made in respect of the individual;
(2)the court may make the approval of the debt arrangement conditional upon the individual undergoing training in proper financial conduct, if it found that the circumstances that led to the application for the debt arrangement indicate that the training will assist in the individual's economic rehabilitation; the training shall be carried out in accordance with rules prescribed by the Minister, with the approval of the Constitution, Law and Justice Committee;
(3)assets that do not form part of the creditors' fund as referred to in section 217, and a right in an asset to which the residential home protection set out in section 229 applies, shall not be regarded as securing any consideration for the debtor for the purposes of section 87(2).
Debts and Conditions That Shall Not Be Included in a Debt Arrangement§
325.
(a)A debtor may not be discharged in a debt arrangement from the debts listed in sections 89(b) and 175.
(b)A debt arrangement may not include a condition whereby the debt arrangement will be approved as an economic rehabilitation plan or as an economic rehabilitation order within the framework of insolvency proceedings.
Arrangement Administrator§
326.
(a)The court may appoint an arrangement administrator to carry out all or some of the following acts:
(1)determination of the right to vote and voting power of interested parties at the class meetings;
(2)determination of the extent of the rights of interested parties in the approved debt arrangement, for the purpose of distributing the consideration in accordance with the provisions of the arrangement;
(3)additional acts required for the implementation of the approved debt arrangement, as directed by the court.
(b)The provisions of sections 33 and 37 or sections 125 and 126 shall apply to the appointment of an arrangement administrator, with the necessary modifications.
(b1)The powers of the Official Receiver in relation to a trustee under the provisions of Part 6 shall be vested in the Official Receiver, with the necessary modifications, also in relation to an arrangement administrator.
(c)The Minister may prescribe, with the approval of the Constitution, Law and Justice Committee, provisions relating to the arrangement administrator, including provisions relating to the arrangement administrator's remuneration and powers and relating to the conduct of the proceedings held before the arrangement administrator, including the manner of filing applications with the arrangement administrator, the particulars to be included therein and the manner of determining them.
Jurisdiction of the Court to Hear Disputes§
327.
The court that approved a debt arrangement has jurisdiction to hear a dispute that arose with regard to the interpretation of the arrangement or with regard to its implementation.
Relationship between a Debt Arrangement and an Economic Rehabilitation Plan and an Economic Rehabilitation Order§
327a.
Within the framework of insolvency proceedings, it is not possible to provide that a debt arrangement approved under this Part shall be regarded as an economic rehabilitation plan approved under Section C of Chapter VII of Part 2 or as an economic rehabilitation order within its meaning in Part 3.
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Contact Us →Chapter III: Approval of a Substantial Debt Arrangement in a Bond Company
Definitions – Chapter III§
328.
In this Chapter –
"substantial debt arrangement" means a debt arrangement in a bond company, the subject-matter of which is a material change in the repayment terms of a bond series that includes a reduction of debt or a deferral of the repayment date, including an arrangement under which the bonds, in whole or in part, are to be repaid by way of the allocation of other securities to the bondholders;
"bond trustee" means a trustee appointed under Chapter V-A of the Securities Law;
"bond company" and "bond series" – as defined in the Companies Law, 5759-1999.
Appointment of an Expert to Examine a Substantial Debt Arrangement§
329.
(a)Where negotiations are being conducted between a bond company and holders of bonds of a particular series for the purpose of formulating a substantial debt arrangement, the bond trustee of those bondholders, or if no bond trustee has been appointed as aforesaid – the company, shall apply to the court, in the course of the negotiations, for the appointment of an expert on behalf of the court to examine the debt arrangement (in this Chapter – the expert).
(b)The bond trustee who filed the application for the appointment of the expert, as well as bond trustees of holders of bonds of other series, may propose candidates for the position of expert.
(c)Where an application for the appointment of an expert has been filed, the court shall appoint an expert on its behalf, unless it considers that in the circumstances of the matter the appointment of an expert is not required for the protection of the interests of the bondholders.
(d)The expert shall have accounting and financial expertise, within its meaning under section 240(a1) of the Companies Law, 5759-1999, or other professional qualification required for the fulfilment of the expert's functions under this Chapter, as well as appropriate experience, all as prescribed by the Minister with the approval of the Constitution, Law and Justice Committee.
(e)The court shall not appoint as expert a person who is liable to be in a position of conflict of interest between the expert's role as expert and a personal interest or other role of that person or of that person's relative or of another person with whom that person has personal or economic connections, including a conflict of interest arising from an undertaking given by the expert to an interested party in the proceeding or to the representative of an interested party.
(f)Where an order opening proceedings is made in respect of the bond company, the expert shall cease to hold office; nothing in the provisions of this subsection shall derogate from the court's power to vest in the trustee the functions and powers of the expert under this Chapter, with the necessary modifications, or to appoint the expert as trustee if the conditions for that purpose are met under Section A: Appointment of the Trustee, of Chapter VI of Part 2.
Functions of the Expert§
330.
The functions of the expert are:
(1)to provide professional assistance in the conduct of negotiations for the formulation of the debt arrangement, including to give professional advice, personally or through other specialists acting on the expert's behalf, to the bondholders or to the representative appointed by them, and to furnish them with information required for the purpose of conducting the negotiations;
(2)to prepare, in accordance with the court's directions, an opinion on the advisability of the debt arrangement for the bondholders (in this Chapter – the expert's opinion); the expert's opinion shall be furnished to the court, to the company, to the bond trustee and to the bondholders a reasonable time before the convening of the meetings under section 323, at a date to be directed by the court;
(3)to examine whether a distribution made by the company in a period determined by the court that preceded the appointment of the expert constitutes a prohibited distribution within its meaning in section 301(b) of the Companies Law, 5759-1999 (in this Section – examination of past distributions); the findings of the examination as aforesaid shall be furnished to the court, to the company, to the bond trustee and to the bondholders no later than the date of furnishing the expert's opinion.
The Expert's Opinion§
331.
(a)The expert's opinion shall address, inter alia, the alternatives to the proposed debt arrangement and the consideration that the bondholders would receive under each of the alternatives, and in particular the expert shall examine the alternative of liquidating the company and the possibility of selling the company or its assets to a third party.
(b)If, in accordance with the proposed debt arrangement, shares are to remain in the hands of those who were shareholders of the company on the eve of the arrangement, the expert's opinion shall also address the following:
(1)the value of the shares that are to remain as aforesaid and in particular the shares that are to remain in the hands of the controlling shareholder of the company, and the consideration that the shareholders will give for them;
(2)the possibility of repaying the bonds by way of allocating the shares that are to remain as aforesaid to the bondholders or by way of selling them to third parties.
(c)If the proposed debt arrangement includes a provision whereby the bondholders or the company are to be barred from suing an office holder in the company, an interested party therein as defined in the Companies Law, 5759-1999, or another person (in this subsection – exemption from liability), the expert's opinion shall also address the following:
(1)an examination of whether acts or transactions carried out by the person in respect of whom the exemption from liability is proposed, in the period preceding the date of filing the application for approval of the debt arrangement, give rise to causes of action for the bondholders or for the company against that person, including a cause of action under section 106(c) of the Companies Law, 5759-1999;
(2)the estimated economic value of the exemption from liability having regard to the findings of the examination under paragraph (1), and the considerations for granting the exemption as aforesaid.
(d)If the proposed debt arrangement includes different consideration for holders of bonds of different series, the expert's opinion shall also address the advisability of the proposed arrangement for each of the series and the fairness of the distribution of the consideration among the bondholders.
(e)If the proposed debt arrangement forms part of a debt arrangement between the company and other creditors, the expert's opinion shall also address the advisability of the arrangement for those creditors.
(f)The Minister may prescribe additional matters to be included in the expert's opinion and may also prescribe provisions relating to its form and the manner of its furnishing and the furnishing of the findings of the examination of past distributions.
Convening of Class Meetings§
332.
The court shall not direct the convening of class meetings of interested parties in a substantial debt arrangement under section 322 before it has received the expert's opinion and the findings of the examination of past distributions; the date for convening the meetings to be set by the court shall be a reasonable time after the furnishing of the opinion and the findings of the examination to the company, to the bond trustee, to the bondholders and to the court.
Power of the Expert to Require Information§
333.
(a)The company and the bond trustee shall furnish the expert with any information required by the expert that is necessary for the fulfilment of the expert's functions.
(b)If the company or the bond trustee considers that information required of it by the expert is not necessary for the fulfilment of the expert's functions, it may apply to the court for an exemption from furnishing the information.
(c)The court may set conditions for the furnishing of information under this section, including a prohibition on furnishing the information to the bondholders.
Remuneration and Expenses§
334.
(a)The court shall determine the remuneration of the expert, and may authorise the expert to obtain services from other specialists for the purpose of carrying out the expert's functions, at a cost to be determined by the court.
(b)The remuneration of the expert and the costs referred to in subsection (a) shall be paid by the company, unless the court has determined otherwise, for special reasons that shall be recorded; however, where the debt arrangement forms part of a debt arrangement between the company and other creditors, the court shall determine who shall bear the remuneration and the costs.
Preservation of the Powers of the Bond Trustee§
335.
Nothing in the provisions of this Section shall derogate from the powers of the bond trustee under any law.
Exclusive Approval Procedure§
336.
A substantial debt arrangement in a bond company shall have binding effect as referred to in section 320 only if it has been approved in accordance with the provisions of this Part.
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