Israel’s Companies Registrar is responsible for registering a corporation in Israel. This article focuses on the formation of limited liability companies (LLCs).
Limited Liability Companies
Limited liability companies protect their shareholders from becoming 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 shares they hold. In the case of establishing a new entity that is not a limited company, the shareholder’s 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 with several stages and conditions. According to the Israeli corporation law, failure to comply with the relevant law and tax obligations required to establish a company may prevent its establishment. In the following paper, we will describe the requirements of the Israeli corporation law when forming a limited company LLC.
Company Establishment Requirements
According to the Israel Corporation Law, any person (including legal persons) may establish a company on 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 be detailed in the association articles and submitted to the Companies Registrar.
Shareholder and Director Requirements
According to the law, the formation of a new company in Israel requires at least one shareholder, who may also serve as a director of the company.
Choosing the Company Name
Before 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.
Drafting Articles of Incorporation
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 legal activities, any lawful business, or any activity except those listed in the company’s articles of incorporation.
Limitation of Liability
Limitation of liability- the company’s owners must describe their responsibility for its debt and whether it is limited.
Capital and Shares
The company’s capital and shares- establishing a new company in Israel must include a description of its capital and distribution among its shareholders, including specific details of the capital of preferred shares, share capital management, and more.
Additional features- elements not obligated to detail under the Israeli company law, including regulations concerning the management practices of the company, details of the rights and obligations of the company’s shareholders, and more.
Setting up a company in Israel involves state fees and bureaucracy. To ensure its success, the company should invest a lot of thought in writing the articles of incorporation and matching them to the needs of the company.
Establishing a new company in Israel ends with registering with the Companies Registrar. To register, four documents are required: a registration request, a statement of the first shareholders, a declaration of the first directors, and the articles of incorporation.
Registration, Formation request
Statement of First Shareholders
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 First Directors
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
Articles of incorporation- the first articles of incorporation should be signed by the first shareholders 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 Israeli law requires.
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 the establishment by the Registrar will the establishment of the company be allowed. Because of the above, one is strongly recommended to use an attorney specializing in corporate law to establish a new company in Israel.
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