Registering a public-benefit company in Israel

How Do You Register a Public-Benefit Company in Israel?

Registering a public-benefit company is a slightly more complicated process than registering an association or company. For example, a non-profit organization is established for a purpose that is officially defined at the time of establishment, and the list of possible goals of a public-benefit company is relatively limited. A public-benefit company must register twice – with the Registrar of Charitable Trust and the Registrar of Companies. The Jerusalem branch of our law firm deals with issues related to associations, non-profit organizations, and companies. This article by lawyer Michael Decker explains the procedure of registering a public-benefit company.

A Public-Benefit Company Must Be Registered Twice:

Starting from 2007, when Amendment No. 6 to the Companies Law was added, public-benefit companies must be registered both with the Registrar of Companies and the Registrar of Charitable Trust. The Registrar of Charitable Trust sends to the Registrar of Companies a confirmation that the public-benefit company has registered with him, and only then can the public-benefit company register as a company.

Furthermore, if a public-benefit company has registered as “just” a regular company, as if it were founded for profit, and the authorities discover that the company is in fact a public-benefit company in terms of its goals and procedures, it may be fined and the company may be forcibly registered as a public-benefit company. In contrast, if a company is registered for public benefit, then it obviously must not act to bring profit to the founders and shareholders.

Goals of Establishing a Public-Benefit Company:

As mentioned in our article “Amuta vs Community Interest Company (CIC) in Israel“—in contrast with an association, there is a limited number of categories that are considered by Israeli law as “public benefit” for the purpose of registering a company as a public-benefit company. However, if the public-benefit company registers as a “regular” for-profit company but its goals are to promote public-benefit issues, this is one of the circumstances in which the authorities may fine the company and register it as a public-benefit company. An updated list of goals that can legally be chosen by public-benefit companies is published on the website of the Israeli Ministry of Justice.

Registering a Public-Benefit Company – Required Documents:

As of 02.2018, the website of the Israeli Ministry of Justice brings together the guidelines and documents that are required for registering a public-benefit company on this page, which can be accessed by choosing “Public-benefit company” as the type of company in Step 1 on the page, and then “Registration of a new public-benefit company” in Step 2.

Some of the required documents are an application for registering a public-benefit company, the company’s articles of association (signed by the shareholders), a statement of shareholders’ equity, a statement of the directors’ qualifications, a list of the members of the audit committee, a list of the shareholders, and more. All documents must be duly authenticated by a lawyer. If some of the founders of the company are foreign citizens, a passport copy and document authentication must be attached. The fee for registering the company may be paid via the website of the Israeli Ministry of Justice.

After establishing a public-benefit company, it is important to pay attention to the differences between management of a public-benefit company and management of an association or company:

A public-benefit company consists of shareholders who appoint directors and an audit committee. They may not be removed or have their shares taken away.
A public-benefit company must appoint an accountant as any other company, regardless of the volume of annual turnover.
Over the years, the authorities have been clearly working to unite the essential guidelines and regulations of associations with those of public-benefit companies, including a requirement for public-benefit companies to obtain proper management approval, as required of associations.
An external member may be appointed to the audit committee of a public-benefit company, but he must not be a representative of a corporation or a shareholder and he must not be paid.
Public-benefit companies may receive approval for ancillary business activity retrospectively, but only after legal proceedings.
A public-benefit company may disassemble and merge only with another public-benefit company. It may not merge with an association.
Transactions between shareholders and directors in public-benefit companies are possible, but only after obtaining special court approval.

Contact our law firm in Jerusalem and Tel Aviv for information and legal advice regarding registration and management of a public-benefit company.