Israeli Registrar of Companies Increases Enforcement Measures against “Violating” Companies

The Israeli Registrar of Companies has recently begun increasing its enforcement measures and exercising its authority to impose financial sanctions on companies (and on their board members) that failed to fulfill their annual reporting obligations and/or that failed to pay the annual fee to the Registrar of Companies, as required pursuant to the Companies Law.

As part of its intensified efforts, the Registrar is sending demand letters to these companies. The Registrar will subsequently classify any company that fails to fulfill its obligations as a “violating company. Failure to rectify the violation may also result in a fine of ILS 8,570.

If a company does not rectify the violation within the defined time frame, the Registrar may also refuse to register various actions for the company (as further specified in the Companies Law), for example:

1. ŸRegistration of changes in the company’s name, or an amendment to the company’s objects and/or its articles of association (if the company is applying to become a public benefit company).
2. ŸRegistration of liens in favor of the company or liens on its assets.
3. Registration of a new company when one of its founding shareholders is either a controlling shareholder in a “violating company” or is itself a “violating company.”

Furthermore, if the Registrar classifies a company as a “violating company,” this may adversely affect its ability to receive credit from banks. Banks may sometimes even contact companies directly to advise them to rectify any breaches vis-à-vis the Registrar of Companies.

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Barnea Jaffa Lande’s Corporate Department is at your service to advise you on filing updates and reports to the Registrar of Companies.

Adv. Uri Hillel is a partner in the firm’s Corporate Department.