Liquidation of an Israeli Company
Did you open an Israeli company but now want to close it? Does a company in Israel owe you money, and you have realized that it will not be able to pay back its debt?
In this article, Advocate Michael Decker from Cohen, Decker, Pex & Brosh law firm in Jerusalem explains the various ways in which you can liquidate (close) a company according to the Companies Law in Israel.
3 Ways to Legally Liquidate a Company in Israel
Section 244 to the Companies Law states that liquidating a company in Israel can occur in one of three variations:
Liquidation by court order.
Liquidating a company under court supervision.
The purpose of liquidating a company in Israel is to terminate the connection between the company and its shareholders after the company no longer exists.
Liquidating the Company by Order of a Court of Law
The District Court in Israel is the court authorized to give a liquidating order to a company. The reasons for which the court may decide to liquidate a company are mentioned in the law. One reason could be that the company did not start its business within a year after its incorporation or that it has stopped doing business for a year. However, the reason to liquidate a company can be due to the fact that the company got into financial trouble, so deep that it has become insolvent.
Shareholders’ or Creditors’ Decision to Liquidate an Existing Company
Israeli company liquidation by free will is a situation where the company itself is asking to liquidate. In this case, the liquidation process occurs outside of court. There are two types of liquidation of an Israeli company by will:
Liquidating with solvency: In this procedure, shareholders ask to liquidate the company on their own initiative. In this case it is important to make sure that the company does not have debt and/or that it is able to pay all its debt to the creditors within 12 months.
3 Main Stages of Liquidation
Serving a statement of solvency by a majority of directors of the company.
Holding a general assembly meeting of the shareholders in order to appoint a liquefier to the company.
Final confirmation report of the company liquefier by the shareholders.
Liquidating without solvency: In case the company cannot pay its debt, the company creditors have the option to demand the company’s liquefaction (meaning to forcing the company to willingly liquidate). In such a case, along with the shareholders meeting, there will be a creditors meeting in order to appoint a liquefier to the company.
In case of liquidating a company by its creditors, after appointing the liquefier, the business actions of the company are only for the purpose of liquidating the company. An Israeli company that is in the process of willingly liquidating must pay an annual fee to the company registrar until it is fully dissolved. However, in some cases, you might be able to be exempt of the fee by submitting a request to the government registrar during the procedure of liquidating the company.
Israeli Company Liquidation under Court Supervision
In this case, in spite of the company’s desire to liquidate outside of court, the court may decide that the remaining liquidation process will be done under the court’s supervision according to the orders and conditions set by the court. The reasons for court supervision may vary, but in general this is done in complex matters when it seems that liquidation by free will is not possible. In fact, this is a process that combines liquidating willingly and liquidating under court supervision.
The procedure of company liquidation in Israel is long and complex and requires expert knowledge in this area. Our lawyers at Cohen, Decker, Pex & Brosh have obtained much experience in the liquidation process and will be happy to assist you.