Doing Business In Israel 2017

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Corporate

Insolvency

Law in Israel

The Israeli law distinguishes between insolvency law applying to individuals, which is

principally governed by the Bankruptcy Ordinance [New Version] 1980, and insolvency

law applying to corporations,which is governed by a number of

will only

address insolvency law as it applies to corporations, providing a brief overview of two

corporate insolvency procedures that exist under Israeli law, outlining recent legislative

updates and briefly discussing recent particular proceedings that stands out.

Liquidation

A company liquidation procedure starts with the filing of a motion for liquidation (by

a creditor, shareholder or the company). If the motion is granted, the Court will issue

a liquidation order in respect of the company, following which a permanent liquidator

will eventually be appointed.

The liquidator or special administrator of the company is faced with three options:

(a) discontinuing the company’s operations and selling its assets; (b) effecting an

expedited sale of the company’s operations; (c) temporarily operating the company

under the “umbrella” of the liquidation and selling its assets in the future.

The basic condition onwhich the liquidationmotionwill be granted is that the company

is insolvent. Accordingly, the key question in this context is how to determine whether

or not a company is insolvent. Over the years, case law has developed two tests for

determining whether a company is insolvent: the balance sheet test and the cash flow

test, with both tests being applied in parallel.

The balance sheet test examines whether the company’s equity is positive or negative.

In contrast, the cash flow test – also referred to as the “liquidity test” – focuses on the

ability of the company to repay its debts and to meet its liabilities to its creditors at

the point in time when these debts fall due, rather than on the value of its assets at a

given point in time.

Suspension of Proceedings ("SoP")

In contrast to other jurisdictions, and unlike Chapter 11 of the American Bankruptcy

Over the years, case law has developed two tests for determining whether a

company is insolvent: the balance sheet test and the cash flow test, with both

tests being applied in parallel.