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Conflicts of Interest in Israeli Non-Profit Organizations

Joshua Pex

Alexander P Gutterman

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Israeli law has clear rules regarding employing family relations of board or committee members in order to ensure proper management and prevent conflicts of interest in Israeli non-profit organizations.

This Series of Posts

Our team of lawyers at our law firm has experience in a variety of fields, including Israeli non-profit law.  This article is one in a series focusing on issues related to non-profits or charitable organizations (an amutah in singular and amutot in plural) in Israel.  This series addresses some rules for proper and legal management of non-profit organizations in Israel in order to better help you manage your Israeli non-profit organization.

For more information on the Israeli Corporations Authority which oversees Israeli non-profit organizations, see the government website.  For more articles from an Israeli lawyer and legal advice for Israeli non-profit organizations related to the topic of this article, see our articles about the Israeli Corporations Authority and rules on transferring funds.

Background

conflicts of interest in Israeli non-profit

While the Israeli Amutot Law does not expressly discuss family relations or forbid family relations between the members of the three mandatory institutions of the amutah — the General Assembly, the Executive Board and the Audit Committee — and the employees of the Israeli non-profit organization, Section 27 of the law goes into this further.  Section 27 elaborates on the interests of the non-profit organization and the responsibility of the Executive Board to carry out the amutah’s interests, including managing employees in an objective manner.  The board’s objectivity could be influenced if family relationships are involved.

Defining Family Relationships

According to Israeli law for non-profit organizations, family relationships or relatives include a sibling, parent, grandparent, children, grandchildren, great-grandchildren, a spouse’s children or a spouse of any of the above.

Employment and Contracts

As objectivity could be influenced due to family relations between board members or committee members and employees, this could pose a conflict of interest.  As a result, Audit Committee and Audit Body members are not allowed to be employees of the non-profit organization.  Executive Board members who have family relations with employees can be employed in some cases so long as no more than ten percent of employees are related to the board or committee members.

Rules on Family Relations between Executive Board and Audit Committee Members

It is important to avoid conflicts of interest between the Executive Board and the Audit Committee.  As a result, an Executive Board member cannot simultaneously be an Audit Committee member.  Additionally, an Executive Board member’s relative may not serve on the Audit Committee.  For example, if an Executive Board has five members, two of them may be related, but not three, because they then constitute a majority of the board that are related.  However, it is not permitted to have family relations (for example, spouses) who serve on both the Executive Board and Audit Committee, nor can there be family relations between an Audit Committee member and an employee.

Other Conflicts of Interest in Israeli Non-Profit Organizations

If there is a situation where an amutah member or one of its institution members may not be able to make a decision on behalf of the Israeli non-profit organization due to a conflict of interest, then this individual must not participate in the decision or give their opinion.

If the Israeli non-profit organization is engaged in some sort of transaction with an entity somehow connected to the amutah, then it must be very strict in the way it manages the transaction, even more so than if it were a transaction with an entity it was not connected with.

Contact Us

If you have questions about family relations or conflicts of interest in Israeli non-profit organizations, please contact us.

Advocate Joshua Pex specializes in Israeli non-profit law and would be happy to discuss the needs of your non-profit organization with you.

ייעוץ משפטי https://lawoffice.org.il/: 03-3724722, 055-9781688 

רחוב עמל 37 פתח תקווה 4951337 ישראל, https://lawoffice.org.il/: [email protected]

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