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OrdinanceCorporate & Business

Partnerships Ordinance [New Version], 5735-1975

פקודת השותפויות [נוסח חדש], תשל"ה-1975

Published: 1975-07-07Consolidated Hebrew text as of 2023-09-18 · Last amended 2015-02-23✓ Amendment status checked against the Knesset legislation record on 2026-09-15
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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

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.

Chapter IV: Between the Partners Themselves

Duty of a Partner towards Fellow Partners§

29.

The duty of partners is to conduct the business of the partnership for the common benefit, to be honest and faithful with one another, and to render to every partner or that partner's representative true accounts and full information in every matter relating to the partnership.

Variation of Terms of Partnership by Consent§

30.

The mutual rights and duties of the partners, whether determined by agreement or defined by this Ordinance, may be varied by the consent of all the partners, and such consent may be express or implied from the course of business.

Partnership Property§

31.
(a)The property, rights and interests in property originally brought into the partnership capital, or acquired in the course of its business, by purchase or otherwise, on account of the partnership or for the purposes thereof, are partnership property for the purposes of this Ordinance.
(b)Where co-owners of real property, which is not partnership property, carry on a partnership in the profits arising from the use of the real property and have purchased with the profits moneys other real property for use in the same manner, the purchased real property shall, in the absence of any other agreement in that regard, belong to them not as partners but as co-owners in the shares they held in the original real property at the date of the conveyance.

Property Bought with Partnership Funds§

32.

Property bought with partnership funds shall be treated as bought on account of the partnership, unless a contrary intention appears.

Use of Partnership Property§

33.

Partners are bound to hold and use partnership property exclusively for the purposes of the partnership and in accordance with the partnership agreement; however, the legal beneficial interest in real property of the partnership shall devolve according to the law of inheritance and shall be held, as necessary, on trust for the benefit of those entitled under this section.

Rights and Duties of the Partners§

34.

The rights of the partners in the partnership property and their rights and duties in relation to the partnership shall be determined, subject to any express or implied agreement between the partners, in accordance with the following provisions:

(1)A partner is entitled to a share in the capital of the business and its profits, and is liable to contribute to the losses of capital or other losses of the partnership, in proportion to the amount of capital agreed to be subscribed; a partner who has not agreed to subscribe capital shall share in the profits and bear the losses of the partnership in the same proportion as the partner who agreed to subscribe the smallest amount of capital;
(2)The partnership shall indemnify every partner in respect of payments made and personal liabilities incurred by that partner in the ordinary and proper conduct of the business of the partnership or in respect of anything necessarily done for the preservation of the business or property of the partnership;
(3)A partner who makes a payment or advance on behalf of the partnership beyond the amount of capital agreed to be subscribed shall be entitled to interest thereon from the date of the payment or advance, at the rate prescribed for that purpose by law;
(4)A partner is not entitled to interest on the capital subscribed before the profits have been ascertained;
(5)Every partner may take part in the management of the business of the partnership;
(6)A partner is not entitled to remuneration for acting in the business of the partnership;
(7)No person shall be introduced as a partner without the consent of all existing partners;
(8)Differences arising as to ordinary matters connected with the business of the partnership shall be decided by a majority of the partners, but no change shall be made in the nature of the business of the partnership without the consent of all existing partners;
(9)The books of the partnership shall be kept at the place of business of the partnership, or at the principal place if there is more than one, and every partner may, at any time that that partner thinks fit, have access to and inspect and copy them.

Expulsion of a Partner§

35.

No majority of the partners shall expel any partner from the partnership unless a power to do so has been conferred by express agreement between the partners.

Retirement from Partnership at Will§

36.

Where no fixed term has been agreed upon for the duration of the partnership, any partner may terminate it at any time by giving notice of that partner's intention to do so to all the other partners; where the partnership was originally constituted by a deed, a written notice signed by the person giving notice shall suffice for its termination.

Continuance after Fixed Term§

37.
(a)Where a partnership constituted for a fixed term continues in existence after the expiry of that term without any new express agreement, the rights and duties of the partners shall be as they were at the date of expiry of the term, and the partnership shall be treated as a partnership at will.
(b)The continuance of the business of the partnership by all the partners or by those of them who were habitually active in it during the fixed term, without any arrangement or winding up of the affairs of the partnership, shall be treated as a continuance of the partnership.

Accountability for Private Profits§

38.
(a)Every partner shall be accountable to the partnership for any benefit derived without the consent of the other partners from any transaction concerning the partnership or from any use by that partner of the partnership property, name or business connections.
(b)The provisions of this section apply also to transactions made after the partnership has been dissolved by the death of one of the partners and before the winding up of its business has been completed, whether made by a surviving partner or by the representatives of the deceased partner.

Prohibition on a Partner Competing with the Partnership§

39.

A partner who, without the consent of the partners, carries on a business of the same nature as and competing with that of the partnership is bound to account for and pay over to the partnership all profits made in that business.

Rights of an Assignee§

40.
(a)A partner who assigns to another the partner's share in the partnership, whether absolutely or by way of charge (security interest), does not, by reason of the assignment, entitle the assignee, as against the other partners, while the partnership subsists, to interfere in the management of the partnership business or affairs, or to require an account of the partnership transactions, or to inspect the partnership books; but the assignment entitles the assignee to receive the share of profits to which the assigning partner would otherwise be entitled, and the assignee shall be bound to accept the account of profits agreed to by the partners.
(b)Upon the dissolution of the partnership, whether as to all the partners or as to the assigning partner, the assignee shall be entitled to receive the share of the partnership assets to which the assigning partner would be entitled as between the assigning partner and the other partners, and for the purpose of ascertaining that share the assignee shall be entitled to an account as from the date of dissolution.

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Chapter V: Dissolution of a Partnership and its Consequences

Dissolution of Partnership by Effluxion of Time or by Notice§

41.
(a)A partnership shall be dissolved —
(1)if entered into for a fixed term — by the expiration of that term;
(2)if entered into for a single adventure or undertaking — by the termination of that adventure or undertaking;
(3)if entered into for an undefined time — when any partner gives notice to the other partners of the partner's intention to dissolve the partnership;

and all subject to any agreement between the partners.

(b)The dissolution of a partnership for an undefined time shall take effect from the date mentioned in the notice, and if no date is mentioned, from the date on which the notice was given.

Dissolution by Death or Bankruptcy§

42.

If a partner dies or is adjudicated bankrupt, the partnership shall be dissolved as to all the partners, subject to any agreement between them.

Dissolution by Charge (Security Interest)§

43.

If a partner allows the partner's share in the partnership to be charged under this Ordinance in respect of the partner's separate debt, the other partners may dissolve the partnership.

Dissolution by Illegality§

44.

A partnership shall be dissolved if an event occurs that makes it unlawful for the business of the partnership to be carried on or for the members of the partnership to carry it on in partnership.

Dissolution by the Court§

45.

The court may, on the application of a partner, order the dissolution of the partnership in any of the following cases:

(1)it is shown to the satisfaction of the court that a partner is of permanently unsound mind; such application may be made by any person authorised to act on behalf of that partner or by any of the other partners;
(2)a partner, other than the applicant, becomes for any other reason permanently incapable of performing the partner's part of the partnership contract;
(3)a partner, other than the applicant, has been guilty of conduct which, in the opinion of the court, having regard to the nature of the partnership business, is calculated to prejudicially affect the carrying on of the business;
(4)a partner, other than the applicant, wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partners to carry on the business in partnership with that partner;
(5)the business of the partnership can only be carried on at a loss;
(6)whenever circumstances have arisen which, in the opinion of the court, render it just and equitable that the partnership should be dissolved.

Competent Court§

46.

The District Court of the district in which the partnership is registered, or in which its principal place of business is situated, is competent to order its dissolution.

Powers of the Court§

47.

Where a partner is entitled to apply for the dissolution of the partnership, or where the partnership has terminated, the court may, on the application of a partner or the partner's representative — in the absence of any agreement to the contrary — wind up the business of the partnership, give directions for the settlement of its liabilities, and distribute the surplus among the persons interested according to their rights; and the court may, if it thinks fit and proper to do so, appoint a receiver of the partnership assets or a manager of its business, or both.

Dealings with Partnership without Knowledge of Change in its Composition§

48.
(a)A person who deals with a partnership after a change in its composition may, until the person has notice of the change, treat all apparent members of the old partnership as still being partners in it.
(b)Notice in Reshumot (Official Gazette) of a change in the composition of a partnership shall constitute notice to all persons.

Authority of Partners for Purposes of Dissolution§

49.
(a)The authority of each partner to bind the partnership, and the other rights and obligations of the partners, shall continue after the dissolution of the partnership, to the extent necessary for winding up the affairs of the partnership and completing transactions begun but unfinished at the time of the dissolution, and to that extent only, subject to any order of the court.
(b)Notwithstanding the provisions of subsection (a), a partner who has become bankrupt shall not in any case bind the partnership; but this provision does not release from liability any person who, after such bankruptcy, represented, or knowingly suffered himself to be represented, as a partner of the bankrupt.

Right of Partner upon Dissolution§

50.

On the dissolution of a partnership every partner shall be entitled, as against the other partners and all persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the partnership, and to have the surplus assets applied in payment of what is due to the partners, after deducting therefrom whatever is due from them to the partnership on account of their being partners therein.

Settlement of Accounts between Partners§

51.

In settling accounts between the partners after a dissolution of the partnership, the following rules shall be observed, subject to any agreement:

(1)losses, including losses and deficiencies of capital, shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits;
(2)the assets of the partnership, including the sums, if any, contributed by the partners to make up losses or deficiencies of capital, shall be applied in the following manner and order:
(a)in paying the debts and liabilities of the partnership to persons who are not partners therein;
(b)in paying rateably to each partner the amount due from the partnership to that partner in respect of advances as distinguished from capital;
(c)in paying the expenses incidental to the winding up of the partnership affairs;
(d)in paying rateably to each partner the amount due from the partnership to that partner in respect of capital;
(e)the ultimate residue, if any, shall be divided among the partners in the proportion in which profits are divisible.

Partner who has Paid a Premium§

52.
(a)Where one partner has paid a premium to another on entering into a partnership for a fixed term, and the partnership is dissolved before the expiration of that term otherwise than by the death of a partner, the court may order the repayment of the premium, or of such part thereof as it thinks just, having regard to the terms of the partnership contract and to the length of time during which the partnership has continued.
(b)The premium shall not be repaid where the court finds that the ground of the dissolution is, solely or mainly, the misconduct of the partner who paid the premium, or where the partnership has been dissolved by an agreement containing no provision for the return of any part of the premium.

Dissolution due to Deceit§

53.

Where a partnership contract is rescinded on the ground of the deceit or misrepresentation of one of the parties thereto, the party entitled to rescind the partnership contract shall, without prejudice to any other right, be entitled to the following remedies:

(1)to a lien on, or a right of retention of, the surplus of the partnership assets, after satisfying its liabilities, in respect of any sum of money paid by that party for the purchase of a share in the partnership and of any capital contributed by that party to the partnership, including interest on those sums from the date of payment or contribution to the date of judgment at the rate prescribed by law for this purpose;
(2)to rank as a creditor of the partnership in respect of any payment made by that party in respect of the liabilities of the partnership;
(3)to be indemnified by the person guilty of the deceit or misrepresentation against all the obligations of the partnership;
(4)to an order requiring the person guilty of the deceit or misrepresentation to repay any sum of money paid or contributed, with interest thereon as mentioned in paragraph (1).

Rights of Retiring Partner§

54.
(a)Where a partner dies or otherwise ceases to be a partner, and the surviving or continuing partners carry on the business of the partnership with its capital and assets, without any final settlement of accounts between them and the outgoing partner or the outgoing partner's estate, the outgoing partner or the outgoing partner's representatives shall, in the absence of any agreement to the contrary, have the option of claiming from the profits made since the dissolution the amount which, in the opinion of the court, is attributable to the use of the outgoing partner's share of the partnership assets, or interest on the amount of the outgoing partner's share of the partnership assets at the rate prescribed by law for this purpose.
(b)Where by the partnership contract an option is given to the surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner or the outgoing partner's estate, as the case may be, shall not be entitled to any further or other share of profits; but if any partner purporting to exercise the option does not in all material respects comply with the terms thereof, that partner shall be liable under the provisions of subsection (a).

Share of Outgoing Partner to Rank as Debt§

55.

The amount due from the surviving or continuing partners to an outgoing partner, or to the representatives of a deceased partner, in respect of the outgoing partner's share in the partnership, shall be a debt accruing at the date of the dissolution of the partnership or the date of the death of the partner, as the case may be, subject to any agreement between the partners.

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