A Merger of Amutot and Israeli Nonprofit Organizations
Israeli Amutot Law includes an amendment which allows for a merger of amutot (i.e., multiple nonprofit organizations; an amutah in singular and amutot in plural) and/or public benefit corporations (cheletz) to combine their efforts and activities. This article addresses this amendment to the law for Israeli amutot.
This Series of Posts
Cohen, Decker, Pex & Brosh is an Israeli law firm with experience in a variety of fields, including Israeli nonprofit law. This article is one in a series discussing what you need to know about nonprofits or charitable organizations in Israel. This series provides information on various rules for legal management of nonprofit organizations in Israel in order to better help you administer your Israeli nonprofit organization.
For more information on the Israeli Corporations Authority which oversees Israeli nonprofit organizations, see the government website. For more articles from an Israeli lawyer and legal advice for Israeli nonprofit organizations related to the topic of this article, see our articles about the Israeli Corporations Authority, record keeping and conflicts of interest.
Israeli law for nonprofit organizations discusses ways for a few amutot or a combination of an amutah/amutot and a public benefit corporation (cheletz) to merge for economic or other reasons. In order for this to happen, one of the corporations must be liquidated. Additionally, its assets and liabilities must then be absorbed by the other corporation.
Internal Approval of the Merger of Amutot
The Israeli nonprofit organization’s General Assembly, Executive Board or Board of Directors must consider whether they wish to approve the merger. They must consider the objectives of the organization being liquidated compared to the objectives of the organization that is absorbing the other one. They must also consider the assets and obligations of the corporation that will be liquidated and absorbed. As Israeli nonprofit organizations are funded by donors, in the event a particular donation has been designated for a specific purpose, the absorbing organization must attempt to fulfill the conditions for use of the funds once the merge is completed.
In order for a merger to take place, the Board of Directors and the General Assembly must approve this merger by a 75% majority. (The only exception to the 75% majority is if the Israeli nonprofit organization’s by-laws or company articles stipulate something different.) If the two merging organizations are related corporations, the Audit Committee of each of the two organizations must approve the merger.
External Approval of the Merger of Amutot
The merger is subject to input from the Registrar of Endowments or Registrar of Amutot. Then, for the merger to take place, the District Court must approve it. The District Court will take into consideration the input of the Registrar of Endowments or Registrar of Amutot that may examine the interests of donors in the merger. These registrars will also raise relevant issues and legal obligations of each organization prior to the merger. Based on this information, among other things, the court will then rule on the legality of the merger.
As this is a complicated legal matter, it is important to employ professional legal counsel prior to moving toward a merger.
If you are interested in a merger of amutot, namely merging your Israeli nonprofit organization with another amutah or a public benefit company, and have questions about this matter, please contact us.
Advocate Joshua Pex specializes in Israeli nonprofit law and would be happy to discuss the needs of your nonprofit organization with you.
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