Clients updates / Start Ups

The Israel Innovation Authority is granting support to new angel investor clubs as part of a series of measures to encourage entrepreneurship and the high-tech industry in Israel.

The IIA’s funding tracks for proof of concept (PoC) give breathing room to fledgling entrepreneurs and ventures during their efforts to transform an idea into a product, even before outside investors are considered.

The state of emergency in the Israeli economy and the massive call-up of reservists are expected to adversely impact the Israeli high-tech industry. The Israel Innovation Authority is establishing an express grant track and is offering a series of reliefs to existing startups to help them sustain business continuity.

A founders’ agreement should resolve problems that might arise in the event of the dissolution of a joint venture. However, even in the absence of such an agreement, the founders cannot evade their obligations pursuant to the Israeli Companies Law.

Israel’s new “Angels Law” grants tax benefits to investors in Israeli startups, and in the Israeli high-tech industry in general, with the goal of spurring the growth of high-tech companies based in Israel or whose intellectual property is registered in Israel.

In order to promote the technology and biomedical industries and to restore the Israeli stock exchange to its position as an efficient and attractive arena for capital raising to companies, an ad hoc committee was formed to analyze feasible tax incentives.

Although Israel is a world leader in the fintech field, companies operating in this area face many regulatory challenges. A newly published legal memorandum aims to enable the creation of a “sandbox”, with inspiration from various programs already implemented in Japan, Australia, and Singapore. The goal is to establish a unique experimental environment, a “regulatory sandbox,” where regulatory relief is granted to companies who choose to participate in the program.

A recent decision by the Economic Division of the Tel-Aviv District Court has emphasized the requirement for officers and decision makers in a company, to undertake a stricter review standard when making decisions, especially in conflict of interest situations. Accordingly companies must now increase the scrutiny on the decision making of directors in private companies, an important decision in light of the current economic climate.

Following a previous Israel Innovation Authority call for bids for companies developing technologies to help deal with the coronavirus crisis, the IIA has opened a channel to support companies facing financial hardships due to the virus.

Due to the coronavirus pandemic, the Israel Innovation Authority (IIA) has issued a major easement for the companies it supports, in the manner in which payroll expenses for companies in the midst of carrying out approved plans will be recognized.

A precedential judgment was handed down on option plans for employees in respect of section 102 of the Income Tax Ordinance. The court ruled that when a tax assessor is notified of the allocation of options in accordance with section 102 and fails to respond within 90 days, the plan is approved and the assessor cannot later claim that this is not so, except in very exceptional cases.

The Ministry of Economy and Industry and the Authority for Investments and Development of the Industry and Economy are presenting a series of steps to bring the Encouragement of Capital Investments Law in line with the Israeli market of 2019.

The Delaware Court of Chancery issued a precedent recently, whereby an acquisition agreement may be cancelled due to the occurrence of a “Material Adverse Effect” (MAE) in the acquired entity.

The Israel Innovation Authority (IIA) announced last week that it issued new directives regarding royalty payments and know-how transfer. These are the first significant directives to be issued by the IIA since it was established in January 2016 and the activities of the Chief Scientist were transferred to it.

On July the Israel Tax Authority presented its position that the sale of equity by a founder should be treated as a capital gain and not income, irrespective of whether such shares had been subject to a Reverse Vesting mechanism and/or Holdback. A double edged sword for entrepreneurs.