Everything You Need to Know About Liquidating a Company in Israel
Israeli Company liquidation lawyer – Israeli Company liquidation guide - Quick guide to liquidating a Israeli company - How to liquidate a company in Israel - Israeli Company liquidation Guide - Israeli Company liquidation lawyer - Israeli Company liquidation
All rights reserved to Adv. Tamir Hodorov ©
Hello and welcome to my guide. My name is Tamir Hodorov and I am a corporate lawyer with extensive experience and very in-depth knowledge. I have been a member of the Bar Association since the end of 2015 and deal mainly in the field of corporations and securities.
Besides my education and experience as a corporate lawyer, I also graduated with a master's degree in business administration (MBA) from Ben Gurion University, with a specialization in finance and securities, with an average grade of 95.53. This education allows me to see and manage details that are both legal, accounting, economic and financial at the same time.
My goal in this guide is to teach you the following chapters:
So let's get going.
What is Company Liquidation?
Company liquidation is a legal procedure of closing a company in the Israeli Companies' Registrar. A company is a legal entity, meaning an entity that is not a person and has no body, and it exists only in the legal world. The process of liquidating a company is actually a legal procedure at the end of which the company ceases to exist in the legal world as well. The state declares it to "no longer exist", and it can no longer have rights and debts or perform legal actions such as signing contracts or hiring employees. That is, at the end of company liquidation, the company is liquidated and its registration in the Israeli Companies' Registrar is changed to "liquidated".
Why Start the Process of Liquidating a Company?
Why would you start the process of company liquidation? Below are a number of common reasons.
The company is no longer in use - if your company is no longer in use, it's time to think about liquidating the company. If you've been holding the company for years and years, receiving letters from the Israeli Companies' Registrar to pay state fees, and you actually don't really use the company, it's time to liquidate it.
Conflict between the partners and shareholders - this is a situation where struggles for control of the company or a lack of cooperation between the partners destroys the company and makes it impossible to run it smoothly. If the shareholders are at odds with each other and the company is stuck and cannot continue the business activity, the solution is to liquidate the company, so each partner can go his own way.
Business failure - if the company did not succeed, and its business failed, it is time to liquidate it. Business failure can be for any number of reasons, including unsuccessful financial management, not a big enough market, too high expenses, too low income, unsuccessful marketing, and many other things.
End by restating your main message. You can sign off with a funny note or an open question.
What Happens as Part of the Liquidation?
A company cannot be liquidated in Israel as long as the company has debts, unless a liquidation order is issued by the Israeli court. Therefore, as part of the liquidation, all the debts and liabilities of the company are paid by its assets. The way to do this is to turn the assets into money with which to pay off debts, or in other words, sell the assets, and use the proceeds to pay off all debts.
The person who does this action is a person appointed to this position, who is called a "company liquidator". A liquidator is a person who is appointed to liquidate the Israeli company, and as part of his role he will locate assets and sell them, collect for the company debts owed to it from customers, and do everything possible to increase the company's asset fund. Afterwards, he will pay the company's debts. Today this position is called "trustee".
Types of Israeli Company Liquidations
While all types of liquidation end with the company liquidation, different liquidation processes are required in different cases. Below are the different types of liquidations. You will be able to see at a glance exactly which type of company liquidation is right for you.
1. Voluntary Liquidation on an Expedited Route
when a company has no assets or money, and no liabilities.
This is the situation where the owners of the company are interested in liquidation and do so of their own free will and independently, for any reason.
This is a relatively new route in Israel, which was opened in May 2019 and allows shareholders in an inactive company to liquidate their company in a much faster route than the usual route.
Today this is the most common way to liquidate a company.
2. Voluntary Liquidation (Normal Route)
when a company has liabilities and assets but has enough assets or money to pay all its liabilities, and no problems are expected.
This is also a case where the owners of the company are interested in liquidation and do so of their own free will and independently, for any reason.
This was the most common way to liquidate a company until the above expedited route was created.
3. Voluntary Liquidation Under Court Supervision
when a company has liabilities and assets and it has enough assets or money to pay all its liabilities, but there is a fear of any problems, such as arguments between shareholders and creditors about the amount of the company's debts. A "creditor" is someone who is owed money.
4. Company Liquidation in court
when a company does not have enough assets or money to pay all its debts.
This is a situation where the company has debts that it cannot pay. This liquidation can be requested by the shareholders of the company, or by the creditors of the company. As mentioned, a "creditor" is someone who is owed money. One of the examples is when the employees in the company are not paid. They will ask the court for the company liquidation, so that they have the opportunity to turn to the Israeli Social Security Institute for recourse. In this case, the liquidation is being "forced" because the owners of the company did not request it.
And now we will go into detail.
Voluntary Israeli Company Liquidation (on the Normal Route and Expedited Route)
In voluntary liquidation on the expedited route, we are talking about a situation in which a company has no assets or money, and no liabilities. This is the simplest situation, since there is no need in a company "liquidator". Above we defined what is a company liquidator, but in short it is a person whose role is actually to pay the liabilities out of the company's assets. Since there are no liabilities, and there is no need for liquidation at all, the liquidation procedure is the fastest. Today, this position is called a "trustee".
What are the Goals of Voluntary Israeli Company Liquidation / Dissolution at the Israeli Companies' Registrar?
Cancellation of accumulated annual state fees debt - the Israeli Companies' Registrar has an "offer": whoever liquidates a company at the Israeli Companies' Registrar receives the benefit of canceling all the state fees due of the previous years, provided that they have not been passed on to collection procedures by the state.
Stop paying state fees for nothing - if the company has no debts, why not just stop its activity and that's it? Because as long as your company is registered as "active" in the Israeli Companies' Registrar, you continue to be obliged to pay state fees every year, and to submit an annual report, even if the company is not at all active from a business point of view.
After the Israeli company liquidation / dissolution, you will no longer have to pay state fees for nothing. If there is no significance to the question of whether the company is in use or not, and an annual state fee must be paid to the state every year that the company exists, starting from January 1st of each year. Starting the procedure for the company liquidation will stop that train of fee payments. Therefore, as soon as you decide that you wish to stop activity in the company, you should immediately contact an Israeli company liquidation lawyer, like us, to start the process of liquidating a company.
Get Free from the obligation to submit annual reports to the Israeli Companies' Registrar - submitting annual reports to the Israeli Companies' Registrar can involve various payments. If the company has no present or future use, these costs are unnecessary.
It is important to remember: if the business activity of the company has ended or stopped, it does not mean that the company has been dissolved. Even if the company has closed its file with the tax authority and closed its bank account, the company still exists legally and therefore the minimum debts of every company still apply to it: payment of an annual state fee and submission of annual reports to the Israeli Companies' Registrar. Only at the end of the liquidation process will the company be dissolved and considered "liquidated", and only then will the annual state fees stop piling up.
Stop all State Sanctions for Non-Payment of Annual state fees and/or Non-Submission of Annual Reports - the Registrar of Companies can impose sanctions on the company for non-payment of annual state fees and/or non-submission of annual reports.
According to section 360(a) of the Companies Law, if a fine is not paid on time, the Israeli Companies' Registrar may demand that the company's directors pay it!
Remove sanctions from the company's director - when a company does not pay annual state fees and/or does not submit annual reports to the Israeli Companies' Registrar, the Israeli Companies' Registrar may change the company's status to "law-breaking", and impose sanctions on the directors. One of the sanctions is not to allow the directors to be able to establish another company in Israel, until they settle the violations of the law in the "law-breaking" company.
Change the corporate structure - another reason for liquidating a company / closing a company is to change the ownership structure of the company or to change its articles of association if there are restrictions that make it difficult for the company to operate, then company liquidation must be carried out, and afterwards establishing a new Israeli company with the desired changes.
Liquidating a Law-Breaking Company
When a company does not pay annual state fees and/or does not submit annual reports to the Israeli Companies' Registrar, the Israeli Companies' Registrar may change the company's status to "law-breaking", and impose sanctions on the directors. One of the sanctions is not to allow the directors to establish a new Israeli company, until they settle the violations of the law in the company "law-breaking".
After a certain period of time that the annual state fees have not been paid, the Israeli Companies' Registrar simply transfers the debts to collection department of the state.
If the Israeli Companies' Registrar changed the company's status to "law-breaking", the Israeli Companies' Registrar can impose various sanctions on the company's directors and its shareholders.
Among the other sanctions that can be imposed on a law-breaking company and its shareholders are the following sanctions:
-The directors may "foot the company's bill". This is a fine of about ILS 8,000!
- It will not be possible to register or remove liens from the company or its assets
- The shareholders will not be able to open a new Israeli company without removing the violations.
- The directors will not be able to serve as directors in a new Israeli company without removing the violations.
The voluntary liquidation procedure removes all sanctions from the shareholders and the directors, and this even before the end of the liquidation procedure of the company.
This is even more worthwhile in the context of the retroactive exemption given to annual state fees as part of the liquidation procedure, as described below.
Israeli Company Liquidation vs. Freezing a Company
Is it possible to "freeze" an Israeli company? The answer is no. A company is not like motorcycle insurance where you can call the Israeli Companies' Registrar and ask to freeze the company and stop paying annual state fees to the Israeli Companies' Registrar. There is no such thing as "freezing a company".
The only way to avoid annual state fees and monetary fines or other non-monetary sanctions imposed on both the directors and the shareholders, is to liquidate / dissolve the company, and for this you need an Israeli company liquidation lawyer. As part of a liquidation process, the company can request an exemption from paying annual state fees for all the years in which the company was not active. You can read the detailed explanation below.
How to do Voluntary Israeli Company Liquidation on the Normal and Expedited Ways?
Voluntary liquidation of a company in the normal route and voluntary liquidation of a company in the expedited route are very similar.
The difference between the two paths of liquidating the company is that in the expedited path you simply skip a few steps.
The Israeli Companies' Registrar
Voluntary Israeli company liquidation is carried out entirely before the Israeli Companies' Registrar in Israel, without any recourse to a court. The company must have solvency, i.e. without debts or in a financial situation where it is able to pay all its debts, and not in a situation of insolvency where it is unable to pay the its debts.
Signing a Solvency Affidavit
Every process of voluntary Israeli company liquidation begins with the directors signing a document called a "Declaration of Solvency", in which they basically declare that the company has enough assets/money to pay all its debts, down to the last Shekel (the Israeli currency), within 12 months from the date of the company's resolution on liquidation.
Once the affidavit has been received and approved by the Israeli Companies' Registrar, it will change the status of the company from "active" to "voluntary liquidation".
The solvency affidavit in the expedited route is in a slightly different wording than the normal route. In this affidavit, all the directors will state that at the time of signing the affidavit, the company has no assets, no bank account or it has been dissolved, no debts, and no fines (except for debt of due annual state fees). The directors will also declare that there are no pending legal proceedings to which the company is a party, and that no administrative enforcement proceedings are being conducted against it.
What Happens if the Directors Cannot Sign the Solvency Affidavit for Company Liquidation?
In a situation where not all the directors can sign the company liquidation for some reason, for example if one of the directors is not available, then as long as the company is in "active" status (good standing) in the Israeli Companies' Registrar, the director who cannot sign can be dismissed, and removed from the company's register of directors. When the company does not pay fees or does not submit annual reports and the Israeli Companies' Registrar changes its status to "law-breaking" and sanctions are imposed on it, no more changes can be made in the company, including the removal of directors, and then all directors are required to sign.
Keeping the Documents for 7 Years
One of the company's directors is required to declare at which address the company's documents will be kept for 7 years after the company liquidation, in case someone wants to look at the company's documents after its liquidation.
Shareholders' Resolution to Liquidate the Company (Company Liquidation on the Normal Route Only)
In the normal route, a meeting of shareholders in the company must be convened, and then a resolution made on two things: a) the company liquidation, and b) on the appointment of a "company liquidator". Today this position is called "trustee".
The resolution to liquidate the company must be made by a majority of at least 75% of the shareholders present.
After that, you must send to the Israeli Companies' Registrar:
- The shareholders' resolution to liquidate the company
-Affidavit of solvency
The Liquidation Operation: the Sale of the Assets and Payment of Debts (Company Liquidation on the Normal Route Only)
At this stage, the liquidator of the company will act to liquidate the company. He will sell all the company's assets, collect debts from customers, and pay all the company's debts with its money. At this stage, the liquidator also addresses the owners of the liens registered on the company for the purpose of removing them, if any.
The liquidator will then distribute the rest of the funds or assets to the shareholders according to their relative holdings. This last step can also be called "dividend distribution in liquidation" (the tax on which is the same as the dividend tax – 30%).
Also, at this stage, the files at the Tax Authority are closed.
Publication in the Newspaper of the Final Shareholder Meeting (Company Liquidation on the Normal Route Only)
After all the liquidation, an invitation to the last and final meeting of the shareholders must be published in the official government newspaper, "The Reshumot", before the company liquidation. At this meeting, the liquidator will be required to present a report detailing exactly what he did, what was paid, what was left, etc.
Advertising in this newspaper involves a fee of only a few hundred shekels.
Notice to the Israeli Companies' Registrar About the Holding of the General Meeting (Liquidation of a Company on the Normal Route Only)
At the end of the process, the liquidator will be required to send the Israeli Companies' Registrar a notice that the final shareholders' meeting has been convened. The liquidator will attach the report of what he has done, the minutes of the meeting, and a copy of the publication in the newspaper of the final meeting of shareholders.
100 days
From the moment all the documents for the voluntary Israeli company liquidation have been properly submitted to the Israeli Companies' Registrar, either by the normal route or by the expedited route, the Israeli Companies' Registrar will issue a notice that the documents have been received, and then a 100-day waiting period begins with the Israeli Companies' Registrar.
The reason why the process takes so long is that a notice of liquidation must be made in an official government newspaper called "the Reshumot". The publication is a standard wording in which it is written that the company's shareholders have made a resolution to liquidate, and anyone who declares that the company owes him any debt may file an objection to the said liquidation. In this way, anyone who wishes can submit an objection to the company liquidation, for example former employees of the company as an employer who did not receive their full payment, or for example suppliers who worked with the company and supplied it with raw materials, goods or services "on credit", that is, with deferred payment, etc.
After the 100 days, if no objection to the liquidation has been registered, the Israeli Companies' Registrar will issue a notice of liquidation, that the company has ceased to exist, or "terminated".
Voluntary Liquidation on an Expedited Route - Not Only for a "Sole Person Company"!
Contrary to what is written on most other sites of Israeli company liquidation lawyers, voluntary Israeli company liquidation in an expedited route is not intended only for the situation of a "sole person company"! In other words, it is possible to voluntarily liquidate a company in the expedited route even in a company that has 3 directors and 20 shareholders.
The Importance of Performing the Actions According to the Order and Within the Time Frame
Closing a company is an irreversible procedure (almost), so doing things carefully is important. The order of things is important, for example the date of the directors' solvency affidavit must come before the date of the general meeting of shareholders to resolve on the company liquidation. The documents must be submitted to the Israeli Companies' Registrar within a certain time (usually 21 days). If you don't do things in order, you can't move on to the next step, and if you don't submit things on time, it resets the whole liquidation process, whereas you will have to start from the beginning.
Voluntary Israeli Company Liquidation: Retroactive Exemption for Annual State Fees
Usually when you wish to begin the process of Israeli company liquidation, the company has already accumulated debts of unpaid annual state fees. In the more problematic cases, the Israeli Companies' Registrar changes the status of the company from "active" to "law-breaking". Without handling these debts, the request for company liquidation will be rejected and it will not be possible to carry out the liquidation / dissolution of the company. On the other hand, as long as the company liquidation is not carried out, the company will continue to accumulate debts for annual state fee payments.
The good news is that the Israeli Companies' Registrar has a "sale": whoever liquidates a company at the Israeli Companies' Registrar receives the benefit of canceling all the state fees of the previous years. The Israeli Companies' Registrar stops this promotion from time to time, but also renews it from time to time.
The exemption for the payment of the fee will only be given for annual state fees of the past that have not yet been paid, but on the condition that they have not yet been transferred to collection procedures by the state, and on the condition that there was no business activity in these years.
This is a significant incentive for shareholders to liquidate the company. Let's say there are debts of ILS 6,000 on annual state fees for 2024, 2023, 2022, 2021, 2020, etc., after all, by starting the voluntary liquidation procedure of a company, you can get an exemption for these debts.
This exemption does not apply to companies that have fallen into involuntary liquidation, i.e. liquidation by the court.
To receive this exemption, the Israeli Companies' Registrar will ask to see in which year the activity ceased. Therefore, it is required to attach to the application for company liquidation one of these documents:
-Confirmation from the Israeli Tax Authority, income tax and VAT on closing the files. The exemption will be granted for the years after the year in which the files were closed.
- Confirmation from the company's auditor on the date of cessation of business activity. The exemption will be granted for the years after the year in which the company's business activity was stopped.
If files have never been opened at the Israeli Tax Authority, these documents will not be required, and the exemption will be granted by the Israeli Companies' Registrar automatically, since the Israeli Companies' Registrar is connected to the Israeli Tax Authority's computer.
It is important to remember: it is not possible to end the procedure of Israeli company liquidation without settling the debts of the state fees, either by paying all the debts, or by receiving an exemption. As mentioned, the exemption will only be given for the years in which there was no business activity, so you have to open your pocket and pay all the state fees for all the years in which there was business activity.
How to do a voluntary Israeli company liquidation / Dissolution of an Israeli company (summary):
1. Submission of a solvency affidavit by the directors to the Israeli Companies' Registrar
2. Convening a general meeting of shareholders to decide on the company liquidation and the appointment of a liquidator for the company (in the normal route only)
3. The company liquidation and the convening of the final shareholders' meeting, including publication in the newspaper (in the normal route only)
4. 100 days of waiting until the company is finally liquidated.
How Long Does it Take to Voluntarily Liquidate a Company in Israel?
We should coordinate expectations and understand that the process is long.
First of all, the last stage (4 above) takes 100 days.
In the normal route, which is not the expedited route, one must add the time it takes for the meeting of shareholders to resolve on the company liquidation, to carry out the actual company liquidation, and to convene the final meeting after the liquidation. This can add about 2-3 months to the liquidation process, mainly because of the need to wait 21 days before convening the final shareholders' assembly.
In addition, sometimes it happens that the Israeli Companies' Registrar accepts the company for registration only a few weeks after all the documents have been submitted. This can prolong the liquidation process of the company. Therefore, a professional is required who is able to follow the process and make sure that the Israeli Companies' Registrar does not overlook the application for the liquidation of your company.
When a voluntary Israeli company liquidation procedure is conducted correctly and in cooperation with an Israeli company liquidation lawyer, it can be completed within six months and sometimes even within four months. In our experience, in cases where companies approach voluntary liquidation procedures without professional guidance, the process may last over a year. In other words, you should get professional guidance from a Israeli company liquidation lawyer.
Voluntary Company Liquidation Under Court Supervision
Voluntary Israeli company liquidation under court supervision, is a procedure that begins at the initiative of the company's shareholders. As part of the voluntary Israeli company liquidation, an interested party can apply to the court for the purpose of supervising the process. The court can give various instructions and resolutions regarding problems that may arise within the procedure between the creditors or the shareholders. There may be concern about the distribution of the remaining funds after the liquidation. There may be difficulty in reaching agreements regarding the transfer of ownership of the intellectual property to the shareholders after the liquidation. Perhaps there is some difficulty in assessing the company's debts.
The application for the voluntary Israeli company liquidation under the supervision of the court is submitted to the district court, through an Israeli company liquidation lawyer.
Nowadays this is a rather rare procedure, but it is extremely useful when it is expected that the liquidation will not be as smooth as all liquidations.
Liquidation of a Company with Debts: Company Liquidation by a Court
liquidation of a Company with debts is the process which is relevant to the situation where the company does not have enough assets to pay its debts.
The process can be voluntary i.e. at the initiative of the company's shareholders, or forced, i.e. at the initiative of the company's creditors (debtors of the company), which can be banks, suppliers, employees or former employees, etc.
The liquidation is not carried out through the Israeli Companies' Registrar, but it is a liquidation in Israeli court.
A company will be liquidated by the court if the company is insolvent and is unable to continue its economic activities, according to the new Insolvency and Economic Rehabilitation Law from 2018. Before this law, liquidations of companies were carried out according to the Companies Ordinance, many parts of which are no longer in force.
How to Liquidate a Company with Debts?
An application for Israeli company liquidation must be submitted to the Israeli district court.
A copy of the application is submitted to the "I/C for Insolvency and Financial Rehabilitation Procedures" (or in its former name: "The Official Receiver").
The court issues a liquidation order, following which all collection processes against the company are stopped, and none of the creditors can further conduct individual collection procedures.
The court appoints a "trustee" (or in its former name: "company liquidator"), whose role is that of the liquidator above. The role of the trustee is to collect the company's assets in order to increase the liquidation fund. He/she identifies all the assets of the company, sells them or realizes them for cash.
The creditors are required to submit their debt claim to the trustee, and all the company's debts are consolidated by the trustee.
With the approval of the court, the trustee begins to pay the company's debts to the creditors in an equitable manner in accordance with the order of preference to the distribution of funds below.
At the end of the payment of all the company's assets to the debts, the liquidation procedure ends and the court issues a liquidation order to the company.
After the company liquidation, it is no longer possible to sue it.
Company Liquidation: Order of Distribution of Funds
Distribution of assets is carried out according to order of preference in an equal manner (Article 231 of the Insolvency and Economic Rehabilitation Law):
Secured Debts - A secured debt is a debt for which one of more assets of the company has been pledged to guarantee the full payment of the debt. For example, the company took a loan to purchase a car, and the lender (for example, the bank) placed a mortgage on the car to secure the debt.
There can be several mortgages on the same property - first, second, third and so on. A first mortgage on a property will have priority, meaning it overrides all mortgages in the second and third degrees and so on.
Expenses of the Liquidation Procedure - the liquidator's fees, fees, legal expenses, and all the costs of the liquidation, including costs for the realization of assets.
Debts Due in Advance - these are special debts such as wages for employees, taxes that have not yet been paid to the Israeli Tax Authority, and deductions for social security that have not yet been paid.
Debts Secured by a Floating Charge - a "floating charge" is a lien on all of the company's assets. This is a lien which is not specific to any property. A floating charge is subject to all specific liens, and in fact the law states that the payment of a debt secured by a floating charge comes after payment for the expenses of insolvency proceedings, and for future legal debts. At the time of submitting an application for Israeli company liquidation to the court, a floating charge "solidifies" and becomes a permanent lien on assets, and the creditor can realize those assets.
Ordinary Debts - i.e. all debts which are not secured.
The Shareholders - as long as there are funds left in the liquidation fund, the funds will be distributed to the shareholders according to their relative share in the company. In an insolvent company, the chance that the shareholders will see even one Shekel is zero. The only way shareholders will see money at the end of a court liquidation process is if the liquidator suddenly discovered that a certain asset they thought was worth X ended up being worth 100X, or something like that.
The Principle of Equality
In each rank of creditors, the funds will be distributed in "pro rata", i.e., in proportion to the amount of the debt owed to each of them, regardless of when the debt was created.
For the purpose of illustration, we have ILS 5,250,000 in the assets fund, and for the sake of simplicity of the example we have three creditors of the same rank, each of whom deserves payment of the following debt:
Joe, with a debt of ILS 3,350,000
Dave, with a debt of ILS 7,100,000
Simon, with a debt of ILS 5,250,000
That is, the total debts are ILS 15,700,000
This means that Joe will receive approximately 21.33% of the property fund, or ILS 1,120,222
Dave will receive approximately 45.22% of the property fund, or ILS 2,374,203
Simon will receive approximately 33.45% of the property fund, or ILS 1,755,573
A total payment of ILS 5,250,000, which is the assets fund.
We note that this order of preference is mainly relevant to a situation of insolvency where there is not enough money to pay all the debts. When there is enough money, everyone gets the payment on their debt account anyway, so it doesn't really matter who gets it before who.
Dissolving a Company with Debts - are There Any Personal Guarantees?
When dealing the company liquidation in court, one must check whether the shareholders have personal guarantee for the company's debts. Personal liability or guarantee cancels the "LTD" feature of the company towards that debt for which the shareholder gave a personal guarantee.
• Are there any guarantees towards investors in the company?
• Is there a personal guarantee of the shareholders towards creditors?
• Is there a personal guarantee of the shareholders in the banks?
If the shareholders have not given personal guarantees for the company's debts, the case is relatively simple.
If there are personal guarantees on behalf of the shareholders for the company's debts, this affects the scope of the work, and during the liquidation one must try to obtain what is called a "debt restructuring" (in Israel its called "creditor arrangement" between the shareholders and the creditors).
Liquidation of a Company with Debts: Can an Office Holder Such as a Director or CEO Get Involved and Be Required by the Court to Pay the Company's Debts?
The law explicitly states that situations in which an office holder such as a director or CEO will get into trouble and have to pay the company's debts are only if there was negligence on his part, for example according to the provisions of section 288 of the Insolvency and Economic Rehabilitation Law, which provides that if a director or CEO knew or was supposed to know that the corporation is insolvent and has not taken reasonable measures to reduce its scope, the court may, at the request of the trustee or the I/C, order that the director or general manager bear responsibility towards the corporation for damages caused to the corporation's creditors due to his failure.
However, the office holder will not get into trouble if he is represented in time by a good company liquidation lawyer who knows the ways to block all ways of harming the office holder, and to prevent the office holder from getting into trouble.
There will also be situations where the office holder simply caused damage to the company, for example when the CEO simply quits and leaves the business to the shareholders, and then a court may charge him personally for damages, according to section 289 which states that if the court discovered that an office holder in the corporation or a person who was in a position that breached a fiduciary obligations towards the corporation, in a way which gives grounds for charging him with compensation, payment or restitution of an asset to the corporation, the court may, at the request of the trustee or the I/C, order that person to compensate, pay or return that asset to the corporation.
Liquidation of a Company by its Employees
A request for the liquidation of a company by the court can be submitted by several parties: the shareholders of the company (voluntary liquidation of a company as mentioned above), or the company's creditors. The company's employees are one example of the company's creditors.
A company which is unable to pay its employees their wages, or pays them partially, avoids contributions to the pension funds of its employees etc., is in a state of insolvency.
Insolvency is one of the common reasons for the company liquidation by employees, when in this situation, its employees may submit a request for liquidation so that they can receive payment of their rights. These are wages, contributions to a pension fund, redemption of vacation days and recovery fees that have not yet been paid and which the employees are entitled to receive them.
In Which Situations is a Company Liquidated by the Employees?
One of the main reasons for the company liquidation is insolvency, i.e. - the company is unable to pay its debts to its various creditors, including its employees. The purpose of the liquidation is the collection of all the company's assets by an appointed liquidator, and the realization of the assets for the purpose of paying the company's debts to creditors in accordance with the order of preference established by law. According to the order of distribution of the funds above, we have seen the order of preference of the creditors who will receive money from the asset fund of the company liquidation.
- Secured debts
- Expenses of the Liquidation Procedure
- Debts Due in Advance <- This is a point where the company's employees enter.
- Debts Secured by a Floating Charge
- Ordinary Debts (unsecured debts)
- The company's Shareholders
As mentioned, the company's employees are among the creditors who's debts are due in advance, which are number 3 in the order of preference. This is a relatively high position.
What Should the Employees Do in the Case of a Company that is Insolvent and They do not Receive Their Salary Payment?
Employees who do not receive their salary payment and this payment is not expected, should immediately submit to the court a request for company liquidation. After the court has appointed a liquidator, they will have to submit a debt claim to the liquidator which will include the debts due to non-payment of wages.
How Do You Liquidate a Company with Debts by Employees?
When the company is insolvent and does not pay salary to the employees, the employees can file a request for the Israeli company liquidation in Israeli court. The employees are creditors, and creditors who do not receive payment of their debt can ask to liquidate the company. The application is submitted through an Israeli company liquidation lawyer.
The procedure is opened by submitting an application for Israeli company liquidation in court.
After that, the copy of the application must be submitted to the Commissioner for Insolvency and Financial Rehabilitation (previously known as: the "Official Receiver").
In the next step, the application for company liquidation must be published in "the Reshumot" (the government official newspaper).
In addition, a copy of the application for liquidation of a company in court, including the documents, must be delivered to the company against which the liquidation is requested.
A court hearing will then take place, after which the court will issue a liquidation order against the company.
The Israeli Social Security Institute Pays the Workers' Rights After a Liquidation Order
In case of Israeli resident employees, once a liquidation order is issued against the company, the employees can apply to the Social Security Institute to receive payment for their rights. The employees will receive their salary, severance pay, travel - literally everything the law covers. In this way, practically all of their financial claims against the asset fund of the company liquidation will have been already eliminated because they receive their money through social security. The employees are the only ones among the creditors who receive such strong "guarantee", and in fact from an financial point of view, their debt is guaranteed in a form even stronger than the secured debt of creditors who have a first mortgage on a company's asset.
To explain this point, the "credit rating" of the Israeli Social Security Institute, i.e. its ability to pay debts, is the state's ability to pay debts. Therefore, debts that are secured by a first mortgage on some asset whose sale may not be sufficient to pay the full debt, are debts whose guarantee of being paid in full is somewhat junior to the guarantee that the Israeli Social Security Institute gives to employees.
The only debt that the Israeli Social Security Institute does not pay, and which the employees can still claim from the company during liquidation, are payments for things that the law does not cover, for example fuel expenses, parking expenses, food expenses, etc. However, apparently this is only a marginal debt component. The company's debts towards the employees are "debts due in advance", according to the order of the distribution of funds that we discussed above, which means that they are in third place on the list.
So let's separate two things.
All wages payments covered by the law will be paid to employees by the Israeli Social Security Institute
All the payments in the pay slip that the law does not cover, the "extras", will be paid to the employees from the assets fund of the company in liquidation.
That way the employees will receive 100% of the debt they deserve.
But the employees just have to take the initiative and ask.
You are welcome to contact us at Hodorov Law Firm for a free initial consultation with Adv. Tamir Hodorov, and to receive a competitive price quote for the company liquidation, by phone +972-52-5690866 or by WhatsApp, or by contacting us by "Contact us" in the website.
How Long Does it Take to Liquidate a Company with Debts in Court / Dissolve a Company in Court?
If you are creditors of the company and want to liquidate the company to receive your debt, liquidating a company can take several months.
In the easy cases, there should be only two hearings in court, with the first one approving or rejecting the liquidation request, and the second hearing being a liquidation hearing after the trustee of the liquidation (the liquidator on behalf of the court) has done his work to find assets to pay the liabilities society as much as possible.
In the more complex cases, the process will take more time - everything depends on the amount of assets, and the amount of debts. All assets must be pooled together, all debt claims must be pooled together, and the procedure must be conducted meticulously and conservatively until everyone sees their money, up to the maximum possible. Such a thing can also take several years.
If you are just an employee of the company, and want to liquidate the company in order to receive the payments you deserve, all you have to do is wait for the liquidation order from the court. Then the Israeli Social Security Institute pays the funds within something like 4-5 weeks.
What is the Cost of Liquidating a Company in Israel / the Price of Closing an Israeli Company?
In liquidating a company, the price of the entire process depends on three factors:
- legal fees.
- Court fee
- Payment of debts to creditors
Of course, in liquidating a company, the cost varies according to the type of procedure.
If it is a voluntary liquidation, there is no court fee, and also if there are no debts then there is no need to pay debts at all. In the voluntary company liquidation on the expedited route, the only cost is the legal fees. In the voluntary company liquidation on the normal route, the cost on top of the legal fees will be the cost of publishing the two notices in "the Reshumot" (the government official newspaper) in the amount of approximately ILS 300.
When it comes to liquidation in court, it is required to pay a court fee, and it is also required to pay debts if any. In a court liquidation, the smaller the company, the lower the costs will be, and the larger the company, the more resources the procedure will require, and thus the cost is expected to be higher.
liquidation Court Fee
In voluntary liquidation there is no need to pay a court fee. The liquidation is free as far as the state is concerned. If it is a voluntary liquidation, there is no need for a court and therefore there is no court fee.
In liquidating a company in court, as of 2024, the district court fee for submitting an application for liquidating a company is as little an amount as only ILS 1,561.
Legal Fees for Company Liquidation
The legal for liquidating a company with several shareholders is about ILS 2,000 to ILS 2,500, excluding VAT.
The legal fee for to liquidating a company with a single shareholder and without liens is approximately ILS 1,500, excluding VAT.
The legal fee for liquidating a company with debts, that is, liquidating a company in court, is subject to a price offer depending on the case.
Contact us now and get a competitive price quote for the company liquidation, by phone +972-52-5690866 or by WhatsApp, or by contacting us by "Contact us" in the website.
Reinstatement of a Liquidated Company / Restoration of a Company After Liquidation / Cancellation of Company Liquidation
Section 369 of the Companies Ordinance, which regulated the reinstatement of a company, was repealed.
In its place, section 100 of the Insolvency and Economic Rehabilitation Law was enacted, which speaks of "cancellation of liquidation", and refers to section 352NB of the Companies Law.
This section says that if a company has been liquidated, the court may issue an order to cancel the liquidation, at the request of any stake-holder, if it finds that it is justified under the circumstances of the case. After an order to cancel the liquidation is issued, it will be possible to take any procedure that could have been taken The company was liquidated.
This section also states that a request for a decree regarding the cancellation of the liquidation must be submitted no later than two years from the date of the company liquidation, but an extension of the deadline can be requested in exceptional cases and for special reasons.
The Service We Provide
Lawyer for Voluntary Israeli Company Liquidation
Voluntary Israeli company liquidation is largely a bureaucratic process, and it includes filling out forms, having the forms certified by a lawyer and submitting everything to the Israeli Companies' Registrar in an orderly manner. The process includes preparing affidavits and certify the signatures on them, producing various documents for the state, and more, all in the right order and at the right time. Therefore, it is important to get assistance from a Israeli company liquidation lawyer at the very beginning of the process.
With in-depth experience in liquidations, both in the simple cases and in the complex cases, we can carry out the process for you, as Israeli company liquidation lawyers.
The liquidation forms require certification by a company liquidation lawyer. An Israeli company liquidation lawyer who goes through all the steps will save you a lot of time and nerves. He is the sure way to the voluntary company liquidation, and the cancellation/reduction of the fee debts of the inactive company. Because it is required to carry out the process strictly, it is simply pity not to use In the service of an Israeli company liquidation lawyer who has so much experience in how to do the process of Israeli company liquidation correctly. Therefore, we strongly recommend the help of Hodorov Law Firm as an Israeli company liquidation lawyer with extensive experience in the process of liquidating a company.
Looking for information and professional service regarding a bankruptcy or company liquidation lawyer? Hodorov Law Firm provides a comprehensive and professional service for handling the Israeli company liquidation, including the cancellation of annual state fees. Hodorov Law Firm works in the field of company liquidation in a professional, reliable manner and has experience of many years.
Important to know!
√ It is recommended to use an Israeli company liquidation lawyer who is familiar with liquidation processes with eyes dissolved, to ensure that the process is carried out properly.
✖ A correct process will advance. Incorrect process will get stuck.
Why Liquidate a Company with Us?
• We will manage the company liquidation / dissolution of the Israeli company for you as quickly as possible.
• We will prepare the forms for you, and submit them on behalf of the company.
• Reliable and professional care.
• Personal service.
• Many years of experience in liquidating companies
• Ongoing legal advice from Israeli company liquidation lawyers
• Regular monitoring of the progress of the liquidation process of the company, until a successful conclusion.
• Cancellation of state fees debts: We will obtain for you the maximum possible exemption from state fees debts.
• Removal of liens: We will remove the liens from your company and the worry from your heart.
• Carry out the procedure quickly without you dealing with bureaucracy
Looking for an Israeli company liquidation lawyer who will take care of the entire liquidation process of the company you own efficiently and quickly?
You are welcome to contact us at Hodorov Law Firm for a free initial consultation with Adv. Tamir Hodorov, and to receive a competitive price quote for the company liquidation, by phone +972-52-5690866 or by WhatsApp, or by contacting us by "Contact us" in the website.
A Lawyer Liquidating a Company with Debts in Court by Creditors
Whether you are the creditors, or you are the shareholders/directors who are interested in receiving protection against an Israeli company liquidation lawsuit, there is no doubt that you need an experienced and battle-tested Israeli company liquidation lawyer, who will represent you in Israeli court.
Representation in an Israeli company liquidation proceeding in court requires great knowledge of local corporate law and insolvency law.
Contact us now and get a competitive price quote for the company liquidation, by phone +972-52-5690866 or by WhatsApp, or by contacting us by "Contact us" in the website.
Lawyer Liquidating a Company with Debts by Employees
If you are an employee who wishes to collect your debt of a salary payment that you never received, it is time to take the initiative and file a request for the Israeli company liquidation in court, by contacting Hodorov Law Firm as an Israeli company liquidation lawyer. Contact us today for an initial consultation free of charge so you can understand what options are available to you, and what moves you can make through us as your legal representatives to get the payment which you deserve.
We will file a request for liquidation of the company in the Israeli court, and we will represent you in the legal process, as well as in the later procedure before the Israeli Social Security Institute, until all your rights are fully exercised.
Even if you are only one employee who has not received a salary, contact us today and receive an attractive and surprising price offer that you will not be able to refuse.
You are welcome to contact us at Hodorov Law Firm for a free initial consultation with Adv. Tamir Hodorov, and to receive a competitive price quote for the company liquidation, by phone +972-52-5690866 or by WhatsApp, or by contacting us by "Contact us" in the website.
Additional Legal Services
At Hodorov Law Firm, we assist companies in the process of voluntary Israeli company liquidation, Liquidation of a Company with Debts, but also assist in registering a company in Israel.
We also provide services for submitting annual reports, making changes in the composition of the board of directors, changes in shareholders such as transferring shares or allocating shares, changing company name, changing the company's articles of association, changing the company's address and more.
Hodorov Law Firm is your one address in the Israeli Companies' Registrar.
You are welcome to contact us at Hodorov Law Firm for a free initial consultation with Adv. Tamir Hodorov, and to receive a competitive price quote for the company liquidation, by phone +972-52-5690866 or by WhatsApp, or by contacting us by "Contact us" in the website.
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