Israel: Restructuring & Insolvency

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This country-specific Q&A provides an overview of the legal framework and key issues surrounding restructuring and insolvency in Israel.

This Q&A is part of the global guide to Restructuring & Insolvency.

For a full list of jurisdictional Q&As visit

  1. What forms of security can be granted over immovable and movable property? What formalities are required and what is the impact if such formalities are not complied with?

    Forms of Securities

    The Pledge Law, 1967 (the "Pledge Law"), is the general legislation governing the creation and perfection of pledge of property and rights under the Israeli law, and it is subject to the specific provisions of various other laws relating to the creation of collaterals on specific assets or with respect to certain types of debtors.

    The provisions relating to the creation of collaterals with respect to assets of companies are regulated under the Companies Ordinance [New Version], 1984 (the "Companies Ordinance"), allowing for the creation of floating charge. Therefore, a floating charge can be created and registered only with respect to the assets of companies and not with respect to assets of individuals or partnerships.

    A mortgage can be registered only on immovable properties that are registered in the Land Registry, in accordance with the provisions of the Land Law, 1969 (the "Land Law"). Collaterals with respect to right in immovable properties unregistered with the Land Registry are governed by the provisions of the Pledge law.

    There are several registries other laws setting forth specific instructions with respect to specific properties such as the Patent Law, 1967, with respect to the creating and perfection of pledge of patents, and certain instruction with respect to pledge of vehicles.

    Required Formalities

    Generally, a creation of pledge under the Pledge Law is made by way of an agreement; however creation of pledge over land registered in the Land Registry (under the Land Law), floating charges and patents must be in writing.

    The creation of a pledge creates a binding obligation between the parties, but only the perfection of the pledge, by registration in the relevant registry of assets, has a binding effect towards third parties, except towards a creditor who knew or should of known of the existence of the pledge; alternatively certain tangible assets and securities can be physically deposited with the creditor or a custodian on its behalf.

    A registration of collaterals with respect to the rights of companies is made with the Registrar of Companies and must be filed within 21 days of the creation of the pledge in order to have force and effect towards creditors and the company's liquidator. Registration of a floating charge shall also include details with respect to any limitations on transfer or use of the company's assets.

    Registration of pledges with respect the assets of individuals, partnerships or foreign companies (unregistered in Israel) is made with the Registrar of Pledges.

    There are several other designated registries such as the Patent Registry, the Vehicle Registry, and the Engineering Equipment Registry.

  2. What practical issues do secured creditors face in enforcing their security (e.g. timing issues, requirement for court involvement)?

    We should mention as a general note that on March 2018, the new Israeli Insolvency and Economic Rehabilitation law, 2018 (the "Insolvency law") has been approved. The provisions of the Insolvency Law will generally become affective with respect to proceedings commenced or collaterals registered 18 months after the legislation. Therefore, the provisions of the Insolvency Law shall not apply in the present Q&A period.

    However, as the new Insolvency Law effectively replaces and/or amends the entire existing Israeli insolvency regime, we would include a general note at the end of each chapter where the new Insolvency Law materially differs from the existing laws. In general, the provisions relating to the creation and perfection of collaterals remains unchanged under the new Insolvency Law.

    Self-foreclosure of collaterals permitted under the Israeli law in very limited circumstances, only by Israeli banks or financial institutions, and only with respect to certain tangible assets and traded securities, deposited with such institutions.

    Any other foreclosure of collaterals will be reported and supervised by the court, execution office or court officer, depends on the type of proceedings and the assets value/debt amount ratio:

    (a) Receivership – the Law Enforcement and Collection System Authority appoints receivers and they will report to it. A receiver may be required to deposit a guarantee to secure performance of his duties.

    (b) Liquidation – a creditor is entitled to foreclose his pledge independently from the insolvency proceeding, subject to appropriate notices to the debtor trustee or the liquidation court. However where the value of the collateral exceeds the debt, the court may supervise the foreclosure process and may even get involved where there is a concern that the process will not protect the residual value of the collateral, for example, where the creditor makes a "fire sale" that may generate lower values.

    (c) Recovery and Re-organization – In the event of a recovery arrangement in accordance with Section 350 of the Companies Law, 1999 (the "Companies Law", and an "Arrangement", in short – a court-run settle¬ment between a company and its creditors and sharehold¬ers, similar in essence to U.S. "Chapter 11" proceed¬ings), there is no automatic stay ("freezing") order, and the court may grant such a stay order if the court is satisfied that a stay of proceedings would help facilitate the preparation or approval of a recovery plan, for a period of up to nine months (which may be extended).

    When such stay order is granted, a secured creditor must apply to the court in order to realize an asset charged in its favor, and according to the provisions of the Companies Law the court shall permit such realization if: (a) it is satisfied that the creditor's rights in the asset have not been properly protected, or (b) the realization of the charged asset is not likely to have an adverse effect on the possibility to recovery of the company.

    Furthermore, a court may, under certain circumstances, allow the trustee to create additional pledges in any rank of seniority including on pledged assets, or even to sell such pledged assets without the secured creditor's consent, all provided that such creditor's rights are properly secured and that such action is essential for the Arrangement proceedings.

    The new Insolvency Law generally maintains the previously mentioned principles, but subjects the consideration from foreclosure of the floating charge to a 75% limit of recovery in favor of the secured creditor. To the extent any debt remaining, it shall be treated as unsecured debt.

  3. What is the test for insolvency? Is there any obligation on directors or officers of the debtor to open insolvency procedures upon the debtor becoming distressed or insolvent? Are there any consequences for failure to do so?

    The Israeli case law recognizes two types of insolvency tests, and did not explicitly chose one over the other:

    (a) The balance test – where the total obligations of a creditor exceeds the value of its assets.

    (b) The cash flow test – examines the debtor ability to repay its obligation when becomes due and payable.

    There is no explicit current legal provisions requiring directors and officers to open insolvency proceedings, however such obligations may be derived from case law and practice, under which in distressed circumstances the officers of the company are required to act in favor of the company creditors, and to take all precautionary measures for such purpose.

    The new Insolvency Law adopts both tests for insolvency and set forth some factual presumptions of insolvency.

    The new Insolvency Law imposes specific liability on directors and officer that knew or should have known that the company is insolvent and did not took reasonable measures to reduce its scope. A presumption of taking reasonable measures exists where such directors and officers acted in order get consultation from insolvency experts, negotiated a debt arrangement with the company creditors or commencing insolvency proceedings.

  4. What insolvency procedures are available in the jurisdiction? Does management continue to operate the business and/or is the debtor subject to supervision? What roles do the court and other stakeholders play? How long does the process usually take to complete?

    The Companies Ordinance and the Bankruptcy Ordinance [New Version], 1980 (the "Bankruptcy Ordinance"), include procedures with respect to the commencement of liquidation procedures, appointment of trustees, stay of proceedings, receivership of assets, debt claim filing and approval, creditors meetings, submission and approval of arrangement proposal, foreclosure of collaterals etc.

    The Companies Law, refers to the same procedures under an Arrangement proceeding, allowing the continuance of the company's operations, including the ability to raise new debt secured by existing pledged assets or using such assets in other manner, as required for the company's operation; or imposing obligations on certain essential suppliers and third parties to continue providing services, or to abstain from cancelling the contract due to the insolvency even if they are contractually entitled to do so.

    In most insolvency cases, a court officer is appointed in order to manage the insolvency proceedings. Where the operation of the company requires a professional team, the court officer may engage such management or continue the engagement of the existing management.

    In recent recovery cases, such as the case of Africa Investments (Israel) Ltd. NIS 3 billion debt arrangement, the creditors skipped the appointment of a court officer and receipt of a stay of proceeding order, maintained a close supervision and involvement in the company's affairs, and negotiated independently the terms of the debt arrangement, leading to significant increase of recovery.

    Insolvency proceedings can take from a few months in very straightforward debt restructuring case up to several years in more complicated liquidation or assets foreclosure cases.

    The new Insolvency Law introduces a new chapter dealing with possible debt arrangement without any court order for the commencement of recovery or re-arrangement proceedings, as already done in practice.

  5. How do creditors and other stakeholders rank on an insolvency of a debtor? Do any stakeholders enjoy particular priority (e.g. employees, pension liabilities)? Could the claims of any class of creditor be subordinated (e.g. equitable subordination)?

    The priory order between the stakeholder is generally as follows:

    1. First ranking tax charges – the tax authorities may have first priority charges, mainly with respect to real estate, requiring repayment prior to distribution of the proceeds of a sale.
    2. Secured creditors and owners of title retention assets – a secured creditor may be able to foreclose its collateral independently from the insolvency proceedings, as set forth in Section 2 above. The same provisions applies in recovery and re-arrangement proceedings to owner of assets under retention of title agreements.
      However, a floating charge will be subject to payment to priory creditors, as set forth below.
    3. Priority creditors – certain debts and creditors will have priority, as follows:
      (a) Insolvency proceedings fee and expenses.
      (b) Certain amount of unpaid wages to employees or loans granted to the company for the payment of wages up to certain amounts.
      (c) Amounts deducted from wages and not paid yet to the income tax assessor.
      (d) Certain unpaid local tax and fees to the Registrar of Companies within the 12 months prior to the commencement of insolvency proceedings.
      (e) Certain taxes to the state imposed within one year prior to the commencement of insolvency proceedings and one-year rental payments.
    4. Unsecured creditors – generally all other creditors shall rank equally.
    5. Shareholders – shareholders may only be entitled by virtue of their shareholdings to the residual value left after repayment of all debt.
      Debts to shareholders, not arising by virtue of their shareholdings, shall not be subordinated in the absence of special circumstances justifying such subordination. Such special circumstances exists where if it is found by the court that the shareholders used the company in order to deceive any person or discriminate a creditor, in a way, which is harmful to the company's purpose or by taking unreasonable risk to its ability to repay its debt. In such circumstances, the court may order the subordination of the company's debt to its shareholders to other debts of the company.
      Furthermore, under the Securities Law, 1968 ("Securities Law"), a controlling shareholder who holds public bonds of the corporation in distress (as defined therein), will generally not be entitled to receive payment of the liabilities owed to him by the corporation until after the corporation has discharged, in full, its debts to other holders of public bonds, unless the controlling shareholder has held such bonds since they were first issued. Alternatively, if there was a different settlement or arrangement between the creditors of the corporation duly approved in accordance with such provisions.

    Under the Israeli court's ruling, the shareholders has very little effect on the approval of a creditor's arrangement, especially when it was not clearly demonstrated that any residual value will remain after repayment of all debts. The new Insolvency Law specifically determines that the shareholders meeting shall only be asked to approve the arrangement if the company's assets allows for the full repayment of all past debts.

    In addition, the obligor and its creditor can agree among themselves, usually through inter-creditor agreements, of the order of repayment of debt or ranking of collaterals, and may give public disclosure and possessory protection to such ranking through registration in the appropriate registry.

  6. Can a debtor’s pre-insolvency transactions be challenged? If so, by whom, when and on what grounds? What is the effect of a successful challenge and how are the rights of third parties impacted?

    Any transaction taking place three months prior to the commencement of liquidation, Arrangement or bankruptcy proceedings, can be challenged, and revoked if found that it was intended to create a preference of any creditor, or made out of illegal constraint or pressure. The court uses the "ordinary course of business" test in order to determine the nature of such transaction.

    This will not affect, however, the rights of a person who purchased an asset in good faith and appropriate value from a creditor.

    Additionally, conveyance of property may be invalid if performed within two years of the bankruptcy, or between 2-10 years, unless the conveyance beneficiary proves the person was solvent at such time without the property conveyed.

    The new Insolvency Law generally adopts such provisions with certain adjustments, while determining stricter terms for the obligor relatives and revoking the requirement of intention to prefer a creditor (focusing on the outcome of such action).

  7. What form of stay or moratorium applies in insolvency proceedings against the continuation of legal proceedings or the enforcement of creditors’ claims? Does that stay or moratorium have extraterritorial effect? In what circumstances may creditors benefit from any exceptions to such stay or moratorium?

    A liquidation order will automatically trigger a stay of all proceedings against the company, unless otherwise permitted by the court. Any transaction in the company's assets or any proceeding with respect to the company made after the date of the liquidation order shall not have any force and effect.

    A stay order is not mandatory in case of Arrangement proceedings. A stay order in Arrangement proceedings is granted for a period of nine months, which may be extended by three months periods. The stay order will prevent any proceedings taken against the company, including the foreclosure of any pledge, the crystallization of floating pledge or receipt of possession of any asset under retention of title, unless authorized by the court. Such court approval will be granted only if the pledged or retained asset does not guarantee proper protection to the creditor, or if granting of such approval shall not harm the chances of recovery.

    The existing law does almost not refer specifically to the extraterritorial effect of the stay order or moratorium. In practice, the cooperation and recognition of the relevant foreign court may be required in order to enforce such proceedings in foreign jurisdiction.

    In the well-known Israeli case of the collapse of Urbancorp Inc., a Canadian company with Canadian assets raising debt by issuance of traded bonds to the the Israeli public capital market, the Canadian court recognized the Israeli proceedings as foreign main proceedings, to which an automatic stay of proceedings applies.

    The new Insolvency Law set forth specific provisions, based on the UNCITRAL Model Law on Cross-Border Insolvency, and international standards, in order to regulate the relation between different proceedings in different jurisdiction or the proceedings with respect to a debtor having assets of creditors in different countries. Under such provision if the Israeli court recognized a foreign proceeding as a foreign main proceeding, it will order a stay of proceedings.

  8. What restructuring and rescue procedures are available in the jurisdiction, what are the entry requirements and how is a restructuring plan approved and implemented? Does management continue to operate the business and/or is the debtor subject to supervision? What roles do the court and other stakeholders play?

    The nature and scope of recovery plan is very wide and can range from the rearrangement of the company's debt, sale of its shares or assets and/or investment by the controlling shareholder or third party investor.

    There are no specific entry requirement, and the court may even grant an order of stay of proceedings for limited time, without advancing a clear draft of restructuring plan.

    The approval of a restructuring plan requires the approval of 75% of the debt voting in each meeting of the creditors of the shareholders (to the extent applicable – see Section 5(5) above). Such meetings are held separately for each type of creditors or shareholders based on their material specific interest differs from the other creditors/shareholders.

  9. Can a debtor in restructuring proceedings obtain new financing and are any special priorities afforded to such financing (if available)?

    An amendment introduced to the Israeli Companies Law in January 2013, allows the court officer to charge the company's assets in charges that may be in a rank that is inferior, equal or even in priority to existing charges, in order to enable receiving new credit, which is essential for the operation of the company.

    The creation of such charges is subject to the court's approval and ensuring "Proper Protection" to the existing secured creditors. Such "Proper Protection" means preserving the value of the debt secured by the charge. Such value of debt relates to the sum that would have been repaid from the sale of the charged asset in liquidation; i.e., the reference point is not the original debt but the value under liquidation.

    Repayment of such new credit shall be treated as recovery expenses and therefore as priority creditor, unless otherwise determined by the court.

    In spite of the favorable terms allowing the court officer to obtain such credit, we are not aware to any actual usage made in such provision.

    A similar provision exists also in the new Insolvency Law.

  10. Can a restructuring proceeding release claims against non-debtor parties (e.g. guarantees granted by parent entities, claims against directors of the debtor), and, if so, in what circumstances?

    It is common that debt settlements includes release of shareholder and officer of the company, subject to an approved contribution of the controlling shareholder to the debt arrangement or to the company in order to maintain its control. Officers (or D&O insurers), sometimes contribute directly in exchange for a waiver from the company and creditors.

    The courts will generally accept such releases, duly approved by the creditors, unless it finds it to be contrary to public policy, vastly unjustified etc.

    In the case of Africa Investments (Israel) Ltd., currently undergoing through its second debt arrangement, the Supreme Court held that the first debt arrangement release provision couldn't release the controlling shareholder from fraudulent actions which were not specifically disclosed and included in the release provision.

    In the second debt settlement currently heard, the court questioned both the amount and rational of the release approved by the creditors and asked the creditor to reconsider the release to the controlling shareholder.

  11. Is it common for creditor committees to be formed in restructuring proceedings and what powers or responsibilities to they have? Are they permitted to retain advisers and, if so, how are they funded?

    It is not common for different types of creditors to form creditors' committees.

    However, it is very common that Israeli traded bondholders from one or more series of bonds forms a representative body, which includes representatives of three or four of the major bondholders, or a professional representative chosen by the majority of the bondholders.

    The representative body is considered as an advisor of the Bondholders Trustee who is nominated according to the Securities Law 1968. The representative body, together with the Trustee, usually handles the negotiations with the company and the investor/controlling shareholder and is capable of providing an initial insight or guidelines as to the terms agreeable by the bondholders.

    As all powers of the bondholders are asserted to the Bondholders Trustee, the Israeli law does not set any provisions regarding the power or responsibilities of the representative body, but the establishment, treatment of information, conflict of interest etc. of the representative body are regulated by the Israeli Securities Authority guidelines and instructions.

    The representative body generally retains financial and legal advisors, the costs of which are born by the company, either by virtue of the deed of trust allowing the bond trustee to engage consultants of the company's expense, or by virtue of a separate commitment, which some companies undertake upon commencement of negotiations with the bondholders. To the extent the company did not borne such expenses there is usually an indemnification rights towards the bondholders.

    In addition to the possible representative body, Israeli Companies Law demands that court will nominate an expert to escrow debt arrangement process that involve public traded bonds. The expert furnishes his professional opinion to the bondholders and other creditors, with respect to the fairness of the suggested arrangement, comparison to possible outcome of liquidation process and to possible legal proceedings against controlling shareholders, directors and officers.

    The new Insolvency Law introduces the concept of a creditors committee the court is entitled to appoint, comprising of different types of creditors other than the unsecured creditors. The creditors committee may present its position in different matters, but does not have a decisive role.

  12. How are existing contracts treated in restructuring and insolvency processes? Are the parties obliged to continue to perform their obligations? Will termination, retention of title and set-off provisions in these contracts remain enforceable? Is there any an ability for either party to disclaim the contract?

    An existing contract may be continued (notwithstanding the existence of a cause for termination) or dismissed by the appointed court officer, to the extent such act is required for the recovery of the company and with the approval of court. The company’s obligation under an existing contract adopted shall have the status of recovery expenses, and any damage to the other contract party shall be deemed as a debt recoverable in the Arrangement proceedings.

    The other party may terminate an existing contract only with the approval of the court officer or the court. A termination cause relating to the occurrence of insolvency proceedings will not be enforced.

    Set off provisions with respect to mutual business between the parties will usually be enforced. Set-off in framework agreements with respect to derivatives or repo transactions such as ISDA agreements, will be enforced by virtue of the Financial Assets Agreements Law, 2006.

    Retention of title provisions will be enforced only if such retention of title is not considered under the Israeli law as collateral for securing obligation. However once a stay order is granted such enforcement will be subject to the court's approval. Such approval will be granted only if the retained asset does not guarantee proper protection to the creditor, or if granting of such approval shall not harm the chances of recovery.

  13. What conditions apply to the sale of assets/the entire business in a restructuring or insolvency process? Does the purchaser acquire the assets “free and clear” of claims and liabilities? Can security be released without creditor consent? Is credit bidding permitted? Are pre-packaged sales possible?

    There are no specific rules with respect to the sale of asset/the-entire in insolvent company, and transaction will be subject to the approval of the creditors as set forth in Section 8 above, which are in such circumstances the material stakeholders, if not the actual owners of the company/assets sold.

    The sale method is a contractual matter and can be done on an AS IS basis without any representation with respect to the company or the sold assets. A "free and clear" sale of control in Companies is possible, and it will usually also include the transfer of all the company's current obligations and certain assets and rights to a trustee for the benefit of the creditors (this is the common technique, for example, for the sale of traded "Shell" corporations in the Israeli Stock Exchange).

    A court officer may release a collateral without the secured creditor consent, by selling a pledged asset in the ordinary course of business, subject to proper protection to the creditor and that the sale is required for the recovery of the company; a release of a fixed charge shall also be subject to the court's approval. Such asset's sale proceeds shall be pledged in favor of the secured creditor, up to the amount of the original asset.

    Credit bidding is not permitted, and the realization of collaterals is only permitted in accordance with the specific provisions of the law, as set forth in Section 2 above.

    Pre-packed sales are not prohibited, but will be subject to scrutiny with respect to their influence on the company’s creditors, and to the duties of officers and directors in insolvency and distress situations towards the creditors of the company.

  14. What duties and liabilities should directors and officers be mindful of when managing a distressed debtor? What are the consequences of breach of duty? Is there any scope for other parties (e.g. director, partner, shareholder, lender) to incur liability for the debts of an insolvent debtor?

    As set forth in Section 3 above there are currently no specific provisions relating to the duties and liabilities of the management of a distressed debtor.

    However, under the Companies Law the officers and directors of a company has a fiduciary duty and duty of loyalty towards the company. In situation of insolvency and distress, such duties applies under the Israeli practice and ruling to the creditors, becoming the most significant stakeholders of the company.

    Under the Companies Law, the consequences of breach of the duty of care by directors and officers are treated as a damages claim whereas the breach of the duty of loyalty is treated as a breach of agreement with the company.

    The new Insolvency Law imposes specific liabilities on directors and officers that knew or should have known that the company is insolvent and did not took reasonable measures to reduce the scope of insolvency. A presumption of taking reasonable measures exists where such directors and officers acted in order to get consultation from insolvency experts, negotiated a debt arrangements with the company creditors or commenced insolvency proceedings.

    The court may determine that any officer or director of an insolvent company (and any person acting in such capacity informally) that was involved in fraudulent conduct shall be personally liable without limitations to all the company's debt. Additionally, any member, shareholder, officer, director or court officer who misused any of the company's funds or assets, or acted wrongfully with respect to the company, may be ordered to remit such funds or assets or be forced to pay compensation as the court will see fit. Such provisions were replaced with certain revisions in the new Insolvency Law.

    The court may order the "piercing of the corporate veil" and attribute the debt of the company to its shareholders if it is found they used the company in order to deceive any person or discriminate a creditor, in a way, which is harmful to the company's purpose, or by unreasonable risk to its ability to repay its debt. An example of such behavior is the use of unreasonable financial leveraging.

  15. Do restructuring or insolvency proceedings have the effect of releasing directors and other stakeholders from liability for previous actions and decisions?

    Please see our answer to Section 10 above.

  16. Will a local court recognise concurrent foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition? Has the UNCITRAL Model Law on Cross Border Insolvency been adopted or is it under consideration in your country?

    Pursuant to the Foreign Judgments Enforcement Law, 1958, a recognition of foreign judgment will be recognized only to the extent there is an agreement between Israel and the foreign country allowing recognition of such types of judgments, in accordance with the terms of such agreement ("Direct Recognition"), or as a side effect for another matter.

    The Israeli Supreme court determined in the recent case of Civil Appeal 1297/11 Levin v. Zohar, that a Direct Recognition of foreign judgments in the fields on insolvency is only possible through the Direct Recognition route as set forth above.

    The new Insolvency Law set forth specific provisions, based on the UNCITRAL Model Law on Cross-Border Insolvency, and international standards, for recognition of foreign proceedings. Under such provisions, the court will recognize a foreign main proceeding or a secondary foreign proceeding, if the foreign proceeding is an insolvency proceeding supervised by a foreign authorized authority and the foreign office holder files an application together with evidence for the opening or conduct of the insolvency proceeding in the foreign jurisdiction.

  17. Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction?

    The insolvency laws of Israel will apply, mutatis mutandis, to foreign companies, which have assets in Israel, whether registered in Israel, or not.

    In the recent Israeli case law of Civil Appeal 2706/11 Sybil Germany Public Co. Limited v. Hermetic Trust (1975) Ltd., the Israeli Supreme Court expanded the tests for application of Israeli insolvency law, by determining that it will apply also to companies raising funds in Israel (thereby creating an "asset" in Israel).

    The Securities Law was amended recently, such that foreign companies issuing securities in the Israeli market are subjected (inter alia) to the Israeli law regarding recovery and arrangements, unless the Israeli Securities Authority exempts a company from such laws if it is assured that the foreign law grants sufficient protection to the Israeli investors.

    In practice, even prior to the amendment of the Securities Law, most of the foreign companies raising bonds in the Israeli Stock Exchange, voluntarily undertook not to object to the application of the Israeli law regarding arrangement, recovery and insolvency and to such proceedings taking place in the Israeli court.

  18. How are groups of companies treated on the restructuring or insolvency of one of more members of that group? Is there scope for cooperation between office holders?

    Under the Israeli law, each company is an independent and separate legal entity, and the officers of each company must act for the benefit of such company and have fiduciary and loyalty duties towards such specific company. Such rule applies also to insolvency situations. However, if the separation of the companies was artificial and they in fact acted as one entity, it may be possible to "pierce the corporate veil" between such companies.

  19. Is it a debtor or creditor friendly jurisdiction?

    Israel was generally a creditor's friendly jurisdiction. In the past several years, certain limitations were imposed on secured creditors in order to increase the chances of recovery and protect the interests of other stakeholders. The new Insolvency and Economic Rehabilitation law, might change this assessment, as it puts the possible rehabilitation of debtors as a main goal. I suppose practical answer to this question will be possible after the courts will start implementing the provisions of the new Insolvency Law.

    However, the Israeli law and ruling still provide many protections and tools to creditors. Those include the requirement to appoint a court expert in any traded bonds Arrangement; the right of a creditors to initiate and approve a recovery plan notwithstanding the lack of consent of the company (Liquidation Case 36681-04-13 IDB Development Company Ltd. v. Hermetic Trust (1975) Ltd. Series 7 and 9 Bond Trustee); and the recent adoption of the creditors committee concept in the new Insolvency Law.

  20. Do sociopolitical factors give additional influence to certain stakeholders in restructurings or insolvencies in the jurisdiction (e.g. pressure around employees or pensions)? What role does the state play in relation to a distressed business (e.g. availability of state support)?

    The court take special interest in the rights of traded bondholders, held by pension and trust funds and therefore represent the public savings, as well as in the interests of the company's employees.

    The Israeli Official Receiver is a party to any insolvency proceeding and it supervises the court officers appointed in such proceedings.

  21. What are the greatest barriers to efficient and effective restructurings and insolvencies in the jurisdiction? Are there any proposals for reform to counter any such barriers?

    The Israeli insolvency laws are mainly based on the Bankruptcy Ordinance and Companies Ordinance, which are archaic legislation based on British legislation which were revoked in the 1980s'. Therefore, court policies and legal precedents govern most of the insolvency legal field.

    As set forth above, on March 2018 the new Insolvency Law has been approved. The new Insolvency Law will effectively replace and/or amend the entire existing Israeli insolvency regime, and will create a modern and uniform insolvency legislation.