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.