Commercial Law

Question:

How does one form a company in Israel?

Answer:

An application to form a company is done through one or more individuals who file the request with the Companies Registrar. The following documents, verified by an attorney, must be attached to the application:
Company name – Note that the company name may not mislead the public or be offensive to public sensibilities, and the Associations Registrar has more than once refused to register a company because of its name.
The purpose of the company – It is accepted practice to state that the company will engage in all legal business.
Details of the authorized share capital – it is necessary to detail the company’s capital, number of shares, type and details of allotment of shares.
Details regarding the limitation of liability – whether the company is limited by shares (Ltd), or not.
Declaration of the initial directors – the person(s) who will outline the company policies, action plans, will review the company’s financial condition, approve the financial statements and the like.
Shareholders declaration – everyone who receives shares of the company is required to sign a statement as prescribed by law. The registration fee varies from time to time and amount ranges around NIS 2,500.

Question:

What is the difference between a limited liability company (LLC) and a regular company?

Answer:

A limited liability company (LLC) limits its members’ liability at the amount of the company’s liability to the amount to which the company is liable to the member. For example, if I own 100 shares in the company and the value of each share is NIS 1, then I am liable for the company’s debts up to NIS 100, whereas shareholders in a regular company are liable for the company’s entire debt to its creditors.

Question:

What is the annual fee paid by a company to the Companies Registrar?

Answer:

The fee varies from time to time and ranges around NIS 1,300. One should not disregard the fee as the Companies Registrar is authorized to sanction the company and its directors.

Question:

How much does it cost to register a company?

Answer:

The cost of registering a company involves payment of a fee in the amount of approximately NIS 2,500 (which varies from time to time) as well as attorney fees which will vary from one attorney to another. Note that it is recommended that you utilize the services of a commercial law firm which specializes in establishing limited liability companies.

Question:

What is the benefit of having a company?

Answer:

The legal concept behind a company is that the company, which conducts all its business operations by means of the company itself, is a legal entity separate and different from its founders and owners. The founders are usually owners of the company by means of holding shares, and are called shareholders.
A share of company stock is actually a bundle of rights and obligations which makes its holder liable to the company and the company liable to the shareholder, including for example, the right to participate in company profits. There is an almost complete separation between the legal entity of the company and the shareholders. If for example there is a claim or cause of action against the company, the claimant cannot sue the shareholders. The avenue for addressing any issue or problem is the company itself. Only in special cases of pronounced dishonesty or fraud will the court approve the lifting the corporate veil and enabling direct action against the shareholders or directors.
Most companies are formed (associated) such that their owners enjoy limited liability. This is noted in the company name. In Israel this is accomplished by the suffix “Ltd.” (limited liability).

Question:

What is a founders’ agreement?

Answer:

A founders’ agreement is an agreement between the partners and the founders, whose purpose is to clarify and settle questions such as the identity of the partners, the business’ capital structure, scope of work, the manner of adoption of resolutions and the right to adopt such resolutions, investment in the business, returns on investment, ownership in the company’s intellectual property and more. An additional topic covered in a founders’ agreement is the matter of dissolution of the partnership and liquidation of the business. In the event you are planning on establishing a business or to invest in an enterprise, we recommend approaching an attorney specializing in contract and commercial law.