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Incorporation

Setting up a company in Israel

When setting up a company you may want to consider these factors:

  1. Business Factor

    In 2014 Israel made starting a business easier by reducing the time required for registration at the Income Tax Department and the National Insurance Institute. Israel presents a strong spirit of entrepreneurialism, supported by low investment costs and a large degree of IP being developed in the country (targeting fin-tech, cyber-tech, medical devices and IoT).

  2. Government Incentives

    The Israeli government is willing to provide R&D grants that range from 20% to 50% of the total approved expenditures; with additional grants (up to 10%) for R&D projects conducted in certain development areas. This funding encourages and provides new entrepreneurs with support for their business ventures.

    The country also provides an advisory service support ecosystem for early stage companies and businesses operating within Israeli-based accelerator programs.

Your Options

The Israeli Companies Ordinance (ICO) defines a company as a corporation formed and registered in Israel, in accordance with Israeli law.

The Israeli Company Law 5759-1999 mentions the following as the main types of companies that can be established in the country:

  • Private Company;
  • Public Company;
  • Branch or foreign company.

Private Ltd Company

A private company, consisting of 1-50 shareholders, and one director, may not offer or sell debentures or shares to the public and its Articles of Incorporation must contain restrictions on the transferability of its shares.

Obtain company registration documents certified by an attorney

The following company certification documents must be certified by an attorney:

  • Application to register the company;
  • Declaration by the initial director(s) of competence to serve;
  • Initial shareholders’ signatures on articles of association.

The company’s initial Articles of Association must be signed by the initial shareholders and their signature needs to be authenticated by an attorney.

File with the registrar of companies, Ministry of Justice

To register a company, the promoter must:

1) File the articles of association;

2) The directors must sign a declaration stating that they have the capacity to serve and their signatures must be authenticated by an attorney;

3) The shareholders must also sign a declaration stating that they have the capacity to hold shares in a company and their signatures must be authenticated by an attorney.

Register for taxes at Ministry of Finance, Income Tax Department

To register for company taxation, the promoter must file the company deed and identity certificate of registration. Final registration confirmation may take up to 28 days.

Register for VAT at Ministry of Finance, Customs and VAT Department

The regional VAT office also operates under Ministry of Finance. To register for VAT, the promoter must file the certificate of incorporation, identity documents for all directors, a lease agreement, and other information. The VAT authority generally asks for a bank account for VAT refund purposes (or for VAT payment). It takes a few minutes to open a bank account, assuming that the company provided all required documents, including a company resolution to open the account and the rights of signature. There are no fees to open the account, but bank commissions may vary according to the bank and bank account features.

Register with the National Insurance Institute

The National Insurance Institute program covers all gainfully employed individuals, with provisions including social security, unemployment insurance, severance payment, training funds, health insurance, and pensions.

Processing time: Approx. 2 weeks

Cost: USD 1,128

Public Company

A public company is a company whose shares are listed for trading on a stock exchange, or have been offered to the public pursuant to a prospectus as defined in the Securities Law, and are held by the public.

If a public company have only offered its shares to the public in Israel or have them traded on a stock exchange in Israel, then it only shall hold its general meeting in Israel.

A public company whose shares have been offered to the public outside Israel only or that are listed for trading on a stock exchange outside Israel only shall file reports with the Registrar of Companies as if they were private companies, with such alterations as the Minister may prescribe.

Voting at General Meeting

A shareholder in a public company may vote by himself or by a proxy, as well as by way of a voting paper under Article G of the CL.

Chairman of Board of Directors

The board of directors of a public company shall elect one of their number to act as chairman of the board of directors, unless another method of appointment is prescribed in the articles of association.

The General Manager

A public company shall appoint a general manager, and may appoint more than one general manager.

Administration of the Company

Registered Office

Without derogating from the provisions of any law, a company shall keep the following documents at its registered office:

  • the articles of association of the company;
  • minutes of meetings of the general meeting as provided in section 90 of the Israeli Company Law (CL);
  • minutes of meetings of the board of directors and resolutions as provided in sections 103 and 108 (CL);
  • minutes of meetings of committees of the board of directors as provided in section 111 (CL);
  • copies of notices from the company to shareholders over the previous seven years;
  • financial reports of the company as provided in section 171 (CL);
  • the register of shareholders, and for a public company the register of substantial shareholders, as provided in sections 127 and 128 (CL);
  • the register of directors, as provided in section 224 (CL).

A company may keep the said documents by using electronic means, provided that those entitled to inspect them are enabled to receive copies of such documents.

A public company shall have a register of substantial shareholders in addition to the register of shareholders.

Reporting by Public Company

A public company shall report to the Securities Authority, to the stock exchange on which the company’s securities are listed for trading, and to the Companies Registry as required by this Law, by the Securities Law or by any other law.

A public company shall report to the Registrar only regarding the following matters:

  • a resolution regarding change of name as provided in section 31 (CL);
  • change of address of its registered office as provided in section 123 (CL);
  • merger as provided in section 317 (CL);
  • its conversion into a public company as provided in section 343 (CL).

Internal Auditor in a Public Company

The board of directors of a public company shall appoint an internal auditor; the internal auditor shall be appointed at the proposal of the audit committee.

A person who has an interest in the company, who is an office holder in the company or is a relative of any of these, as well as the auditor or any person acting on his behalf shall not act as internal auditor of the company.

Financial Reports

A public company shall keep accounts, and shall also prepare financial reports pursuant to the Securities Law.

The Shareholder

A shareholder in a public company is any of the following:

  • A person for whose benefit a share is registered with a member of a stock exchange and such share is included in the shares registered in the register of shareholders in the name of the nominee company;
  • A person registered as a shareholder in the register of shareholders;
  • A person holding a share warrant.

Directors

Two outside directors shall hold office in a public company.

Alteration of Class of Corporation

A private company that has become a public company or a public company that has become a private company shall give notice thereof to the Registrar of Companies within fourteen days of the date of change.

Foreign Company

A foreign company shall not keep a place of business in Israel, and in particular shall not maintain an office for the transfer of shares or for the registration of shares, unless registered as a foreign company under the provisions of this section and unless it pays the registration and publication fees prescribed by the Minister under this section.

Application

The application for registration shall be submitted to the Registrar within one month of setting up a place of business and the following documents shall be attached thereto:

(1)  a copy and translation into Hebrew, confirmed in the manner prescribed by the Minister, of the documents under which the company is incorporated or pursuant to which it operates, as required under the laws of the country in which it is incorporated, including its articles of association, if any;

(2)  a list of the directors of the company;

(3)  the name and address of a person resident in Israel who is authorised to receive judicial documents on behalf of the company, and to receive notices issued to the company;

(4)  a copy certified in the manner prescribed by the Minister, of a power of attorney authorizing a person normally resident in Israel to act on behalf of the company in Israel.

Where an alteration occurs in a document or a change of the directors or the name or address of one of the persons referred to in paragraphs (3) and (4) is altered, the company shall give notice thereof to the Registrar within fourteen days of the date of the change.

The Minister may prescribe additional documents that a foreign company must attach to an application for registration and must notify the Registrar of any changes therein.

A judicial document or notice required to be served on a foreign company registered in Israel shall be considered to have been served in accordance with the law if addressed to the authorized person notified to the Registrar as referred to in section 346 and left at the address notified as aforesaid, or sent there by mail.

Annual report

A foreign company shall file, once a year, an annual report as prescribed by the Minister.

Cost: Approx. NIS 2,450 (USD 570)

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Israel, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Israel they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

– the company is looking to setup an office quickly

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Israel

– the company needs help with tax, employment, immigration and payroll compliance in Israel

The complexity of employment regulations in Israel makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Israel allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Israel.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Israel. Read more about outsourced employment through Shield GEO.

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