The authority responsible for registering a corporation in Israel is Israel’s Companies Registrar. This article focuses on the formation of limited liability companies (LLC).
Limited liability companies protect their shareholders from turning into debtors of all the company’s debts. Therefore, upon establishing a limited liability company, the shareholders must pay the company’s debt only up to the total amount of shares they hold. In a case of establishing a new entity that is not a limited company, the shareholders economic risk is the amount of any obligation of the company.
Establishing and forming a limited liability company, corporation in Israel involves a procedural process, which has several stages and conditions. According to the Israeli corporation law, failure to comply with the relevant law and tax obligations required for the establishment of a company may prevent its establishment. In the following paper, we shall describe the requirements of the Israeli corporation law when forming a limited company LLC.
According to the Israel Corporation Law, any person (including legal persons) may establish a company in condition that none of the company’s purposes is unlawful, immoral or contrary to public policy (Israel Corporation law, section 2). The company’s purposes must to be detailed in the articles of association, and must be submitted to the Companies Registrar.
According to the law, formation of a new company in Israel requires at least one shareholder of the company, who may also serve as a director of the company.
Prior to registering a corporation in Israel, the company’s owners must choose the company’s name. The company’s name can be any name, if it is original. In other words, the name must not be similar to the name of an existing company. In addition, the company’s name must not be misleading, or contrary to public policy or feelings.
Furthermore, it is necessary to draft the company’s articles of incorporation. The articles of incorporation is a contract between the company and its shareholders, and contain the following elements:
The goal of the company – every corporation in Israel must describe the company’s goals in the company’s articles of incorporation. The possible goals are: to engage in various kinds of legal activities, engage in any lawful business or engage in any activity except those listed in the company’s articles of incorporation.
Limitation of liability- the owners of the company must describe their responsibility for the company’s debt, and whether it is limited or not.
The company’s capital and shares- the establishment of a new company in Israel must include a description of the company’s capital and its distribution among the shareholders of the company, including specific details of the capital of preferred shares, share capital management and more.
Additional features- elements that there is no obligation to detail under the Israel company law. Including regulations concerning management practices of the company, details of the rights and obligations of the company’s shareholders and more.
Setting up a company in Israel is not a simple process and involves state fee and a bureaucracy. To ensure its success, the company should invest a lot of thought in writing the articles of incorporation and matching it to the needs of the company.
Establishing a new company in Israel ends with the registration of the company in the Companies Registrar. In order to register, four documents are required: registration request, statement of the first shareholders, declaration of the first directors and the articles of incorporation.
Registration, Formation request
Statement of the first shareholders-declaring that they are permitted to establish a company and hold shares and that the Israeli law does not restrict them.
Declaration of the first directors. This is a statement of willingness to serve as directors. If a corporation serves as a director, it must specify the name of its agent.
Articles of incorporation- the first articles of incorporation should be signed by the first shareholders, and and describe their names, ID numbers, addresses, and number of shares allotted to each of them. The Israeli corporation law requires that an attorney will verify those details.
In addition, one must pay a state fee, as required by the Israeli law.
Only when it is determined that the company complies with all the conditions and requirements posed by the Corporation Law and is not prevented from establishment by the Registrar, then the establishment of the company will be allowed.In light of the above, it is strongly recommend that one use an attorney who specializes in corporate law for the establishment of a new company in Israel.
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