Doing Business in Israel - Legal and Business Guide 2018

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Overview 5

Yigal Arnon & Co., David Osborne and Barak S. Platt

Antitrust and Competition 11

Tadmor & Co. Yuval Levy & Co., Shai Bakal

High-Tech 17

Shibolet & Co., Lior Aviram and Vered Horesh

Intellectual Property 23

Reinhold Cohn Group, Dr. Ilan Cohn and Orit Gonen

International Arbitration 29

Gideon Fisher & Co., Gideon Fisher and Daphna Fisher

Labor and Employment 35

Fischer Behar Chen Well Orion & Co, Shay Teken and

Moran Friedman

Litigation 41

Agmon & Co. Rosenberg Hacohen & Co., Uri Sorek and Tal Mayshar

Mergers and Acquisitions 47

Erdinast, Ben Nathan, Toledano & Co., Roy Caner and Lior Oren

Real Estate 53

Yigal Arnon & Co., Lee Maor

Tax 59

Gornitzky & Co., Daniel Paserman and Danielle Skald

Trusts and Estates 65

Alon Kaplan Advocate & Notary, Dr. Alon Kaplan and Meytal Liberman

Table of

Contents

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WWW.LEGALMARKETING.CO.IL [email protected]

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/5/

Overview

YIGAL ARNON & Co.

David Osborne

Barak S. Platt

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Start-Up Nation

Still Rocking

The publication of Start-up Nation: The Story of Israel's Economic Miracle by Saul

Singer and Dan Senor in 2009 called the world's attention to what many multinational

technology companies and overseas venture capital (VC) funds already knew – that

many of the world's most cutting-edge technological innovations were being developed

in Israel. These innovations have led VC funds from Silicon Valley, London and Hong Kong

to make regular visits to Israel and have resulted in a number of global VC funds opening

offices in Israel. They have brought Israel to the attention of leading global technology

companies such as Apple, Google, Facebook, Intel, Amazon and eBay, each of which has

enriched its existing products by acquiring Israeli technology companies.

Well before Israel came to be identified as the "start-up nation," its harsh desert

climate and scientific prowess combined to make it a recognized international leader

in agricultural technology. Israeli companies created drip and micro-irrigation, biological

pest control, as well as solutions for water conservation, over-fishing and produce

storage. More recently, large reserves of natural gas were discovered off of the coast

of Israel, making it likely that the country will become an exporter of natural gas to

neighbors such as Jordan, Egypt and Turkey. The Israeli government is committed to

encouraging business activities by giving tax breaks and grants for investments to

entrepreneurs who wish to expand their businesses, especially in development areas.

Each of these sectors continued to grow in 2017. The technology sector saw the

largest transaction in Israeli history with Intel's US$15.3 billion acquisition of Mobileye,

a Jerusalem-based leader in autonomous vehicle technology. Yigal Arnon & Co.

represented Intel in this acquisition.

In 2016, US$4.8 billion was invested in Israeli start-up companies. A significant

percentage of this came from Chinese investors. Delegations of executives from China

interested in investment opportunities in Israel have become commonplace. Chinese

companies have also been acquiring controlling stakes in Israeli companies. In one

example, ChemChina acquired 100% control in Adama, the global agricultural chemical

company. Subsequently, Adama entered into a reverse merger with a local Chinese

company, which resulted in it being traded on the Shenzhen Stock Exchange.

The Israeli government is committed to encouraging business activities by

giving tax breaks and grants for investments to entrepreneurs who wish to

expand their businesses, especially in development areas.

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In agricultural technology, Mexichem acquired 80% of Israel’s drip irrigation company

Netafim for US$1.5 billion. Yigal Arnon & Co. represented Mexichem in this transaction.

In May 2016, after a number of legal setbacks, the Israeli government approved a Natural

Gas Framework that has led to renewed development of Israel's natural gas resources

and has revitalized the industry. Following the Petroleum Commission's approval, the

partners in the Leviathan natural gas field approved a development plan that aims to

reach first gas by the end of 2019. The first phase of this plan represented the largest

energy project in Israel’s history with a US$3.75 billion investment.

Concurrently, each of the Leviathan partners raised external financing, including the

reported US$400 million financing to Ratio Oil Exploration and the US$1.75 billion

financing to the Delek Group, constituting the largest project financing ever held in

Israel for a project in the development stage. Yigal Arnon & Co. represented the major

international banking institutions in their capacities as Mandated Lead Arrangers in the

aforementioned natural gas financing arrangements.

In November 2016, a tender for oil and gas exploration in Israel’s offshore exclusive

economic zone was published. This, together with the sale of existing gas fields, may

spur new development and potential exploration and lead to a new dawn for the

expanding Israeli natural gas sector.

Shari Arison, who holds a controlling interest in Bank Hapoalim Ltd., Israel's secondlargest

bank, has signed a memorandum of understanding with certain North American

investment firms and institutional investors to sell 49% of her shares in Arison

Holdings, the controlling shareholder of Bank Hapoalim. Should this transaction be

consummated, not only would it represent one of the largest in the history of Israel's

financial sector, but it is hoped it will contribute to an increase in competition in the

local banking environment.

OurCrowd, led by Jon Medved, has introduced an equity crowdfunding platform that

allows accredited investors to invest in the Israeli start-up market. This has opened the

potential for foreign investment in early-stage Israeli companies.

On the regulatory front, there have been a number of recent reforms designed to

make Israel more attractive to foreign businesses. The Israeli Tax Authority (the ITA)

has lowered corporate income tax rates on income based on intellectual property and

on capital gains from the future sale of IP for qualifying corporations. In addition, the

ITA published circulars designed to eliminate uncertainty regarding several standard

provisions commonly applicable to start-up companies. In one circular, the ITA clarified

provisions related to consideration paid in "holdback" arrangements in merger and

acquisition (M&A) transactions - i.e., in which a founder or key employee holding shares

in the target company will only receive a portion of the compensation for selling such

shares if he or she remains employed by the target company or the acquirer following

the closing of the transaction. In another circular, the ITA clarified provisions related

to shares subject to "reverse vesting" mechanisms – i.e., in which a shareholder is

required to forfeit a portion of his or her shares if he or she ceases to be employed

by the company. These circulars helped to provide a level of certainty to buyers and

shareholders of Israeli companies as well as to potential investors in the market.

In general, the Israeli economy operates autonomously and has not suffered from the

world economic dips, such as those of 2008-2009. There remains a strong culture

among Israelis of discovery and invention, with Israel being a major hub for start-ups and

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technological developments. This culture of innovation, along with M&A exits occurring

on an ongoing basis, has generated considerable revenue for the local economy. After

picking up to 4% in 2016, growth is projected to stabilize around 3.25% in 2017-2018.

Finally, as a consequence of the foreign investments in Israel, the shekel has remained a

strong currency when measured against all the leading world currencies.

Even with the regional geopolitical challenges, the Israeli economy has been identified

as one of the healthiest and most stable in the world. We predict it will continue so in

2018, as strong trends seen in recent years continue to develop.

In the promising field of autonomous vehicles, companies will continue to grow and we

foresee more acquisitions in the field. In addition, Israeli companies will begin listing on

foreign stock exchanges (Canada, Australia and Hong Kong) with more frequency –

such as the recent first IPO of an Israeli company on the Hong Kong Stock Exchange

(in which Yigal Arnon & Co. represented the underwriters and was intensely involved).

Furthermore, the strong M&A activity in Israel, especially in the high-tech field, will

remain robust and will continue to draw in major global companies, as well as foreign

investors –especially from China – that will continue to explore what this great start-up

nation has to offer.

Even with the regional geopolitical challenges, the Israeli economy has been

identified as one of the healthiest and most stable in the world. We predict

it will continue so in 2018, as strong trends seen in recent years continue to

develop.

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Yigal Arnon & Co. is one of the most respected and dynamic law firms in Israel, with a proven track record of quality and

creativity in meeting its clients’ needs. With focused practice groups and over 175 lawyers, Yigal Arnon combines the

expertise of a specialty boutique practice with the advantages of a well-resourced multidisciplinary law firm.

Yigal Arnon provides a full range of legal services to a wide client base, ranging from Fortune 500 companies to

high-tech entrepreneurs working on cutting-edge technology. The firm represents clients in a variety of industries,

including technology, energy, banking, software, electronics, semiconductors, pharmaceuticals, biotechnology, internet

and e-commerce, medical devices, real estate, telecommunications, insurance, automotive, sports, entertainment and

consumer products.

A substantial part of Yigal Arnon’s practice is international in scope. We act as lead counsel in international transactions,

including many of Israel's most significant M&A transactions, strategic alliances, VC and private equity transactions,

joint ventures, public and private financings, corporate and debt restructuring, tax, distributorships, franchises, real

estate investments and more. We have extensive activity in the United States, the United Kingdom and Europe (both

western and eastern), as well as in China, India, Japan and Australia.

Throughout our history, a full spectrum of clients has turned to Yigal Arnon & Co. when seeking professionalism,

service and integrity in helping them to resolve complex and challenging legal problems.

David Osborne specializes in M&A transactions and advises Israeli and international clients, from multinational

companies to private individuals, on a broad range of matters involving commercial and property transactions. His

experience of over 30 years, in Israel, the UK and the U.S., includes cross-border M&A transactions, joint ventures,

partnerships, mergers/competition law, investment and loan agreements and assisting Israeli companies in setting

up suitable corporate structures for their international activities. A particular area of focus has been working with

emerging growth technology companies, for whom David has served as lead counsel in many different corporate and

M&A transactions. David's practice also covers international real estate transactions and family wealth management.

Barak Platt specializes in M&A, high-tech and VC and private equity. His clients range from large multinational

corporations to early-stage start-ups, as well as venture capital funds and private equity funds. In over 25 years

practicing law both in Israel and the United States, Barak has advised clients in many of Israel's largest and most

complex M&A transactions, addressing all aspects of those transactions, including intellectual property issues, tax

aspects and regulatory matters. In addition, over the years, many of the leading players both in the Israeli and the global

venture capital scene have turned to Barak to assist them in hundreds of investments in portfolio companies.

Yigal Arnon

& Co.

David Osborne, Partner

Barak S. Platt, Partner

CONTACT

INFORMATION:

www.arnon.co.il

Tel Aviv office: +972 3 608 7777; Jerusalem office: +972 2 623 9200

[email protected]

[email protected]

/10/

UK ISRAEL BUSINESS

MEMBERSHIP

Recognising that the needs of all our members vary,

UK Israel Business offers a range of tailored membership packages

Advantages of membership include:

Priority booking for networking events

• Our networking events provide a marketing platform for our

sponsors, offer access to industry leaders and the chance to

make high-level business connections

• We offer exclusive round-table briefings for our patron

members

Introductions & market access

• We provide regular in-bound and out-bound introductions for

our members

• We assist UK members planning marketing trips to Israel with

introductions to relevant Israeli companies

• We help Israeli companies operating in the UK acclimatise to

the British business community and in the process facilitate

partnerships with our UK members

Support

• Through our in-depth market knowledge, we act as a sounding

board for members looking to expand their business reach and

can advise on market positioning for Israel

• For more in-depth assignments, members can commission

bespoke market research and intelligence reports

For more information on membership packages, please contact

[email protected] or call +44 20 3510 0002

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Antitrust and

Competition

TADMOR & CO.

YUVAL LEVY & CO.

Shai Bakal

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Competition Regulation

in Israel: The Law, Recent

Trends and Insights

The main competition legislation in Israel is the Restrictive Trade Practices Law (1988)

(the Antitrust Law). The Antitrust Law provides the legal grounds upon which the

Antitrust Commissioner (the Commissioner) and the Israel Antitrust Authority (IAA)

regulate restrictive arrangements, merger transactions, monopolies and concentration

groups.

The Antitrust Law was enacted in the late 1980s with European Union competition

law (the Treaty of Rome) as its primary model and source of inspiration. In the late

1990s, U.S. competition law doctrines and principles began to play a more prominent

role in the IAA’s implementation of the Antitrust Law. This resulted in a more liberal

approach towards mergers and unilateral conduct.

In 2011, major social unrest broke out in Israel. This unrest focused on the high cost

of living, which was attributed to limited competition and weak antitrust regulation.

In parallel, a new Commissioner, with a more hawkish view of competition law, took

office. As a result, the IAA deviated significantly from principles of U.S. competition

law, adopting tougher positions, which often set worldwide precedents. The most

notable example was the amendment of the Antitrust Law, which authorized the IAA

to regulate oligopolistic markets (concentration groups) as well as to micro-regulate

certain sectors.

Since 2012, the Commissioner has been empowered to impose financial sanctions for

a wide range of violations of the Antitrust Law. The IAA’s current policy is to generally

prefer financial sanctions over criminal enforcement for non-cartelistic offences such

as illegal vertical arrangements, abuse of dominant position and failure to comply with

data requests. The power to impose monetary payments is a clear "game changer" in

the enforcement of the Antitrust Law.

Restrictive Arrangements

A restrictive arrangement is defined as any arrangement between business parties

in which at least one of them restricts itself in a way that may decrease competition

in the market, restricts competition between the contracting parties or restricts

competition between any one of them and a third party (the substantive test).

The Antitrust Law further determines the existence of restrictions relating to prices,

profits, market allocation or quantity, quality or type of products or services, rendering

an arrangement a per se restrictive arrangement, regardless of its potential effect

on competition or lack thereof (the per se presumptions). According to case law,

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the per se presumptions are normally not applicable to vertical arrangements (i.e.,

agreements between parties at different levels of the supply chain such as supplierdistributor

relationships), which are assessed under the substantive test. Engaging in

a restrictive arrangement is illegal unless it has been exempted by the Commissioner,

approved by the Antitrust Tribunal or if it falls within the scope of a statutory or block

exemption. Contracting parties’ ability to rely on these exemptions should be carefully

reviewed, as most are subject to requirements (including market share thresholds).

The IAA is currently drafting a revision to the block exemptions that will broaden

the self-assessment of non-cartelistic agreements. Parties to an illegal restrictive

arrangement are exposed to potential criminal, administrative and civil sanctions.

Merger Transactions

Merger control law applies, among others, to the acquisition of the principal assets of

the target (including the acquisition of a line of business) or acquisition of more than

25% of either the outstanding shares, voting rights, rights to appoint directors or

dividend rights of the target company. The IAA must be notified of a merger if at least

one of three thresholds is met: a turnover threshold, monopoly threshold or mergerto-

monopoly threshold. The IAA recently suggested increasing the turnover threshold

substantially in order to decrease the number of reportable transactions. Failure to

notify a merger exposes parties to potential criminal, administrative and civil sanctions.

The IAA is granted an initial 30-day timeframe to review mergers, subject to

extensions. If a decision is not issued within this timeframe, the merger is deemed

as having been approved by the Commissioner. In 2016, the IAA introduced a new

formal procedure for a much expedited review of mergers that clearly do not raise

any reasonable concern for significant harm to competition.

Monopolies

A firm is deemed a monopoly if it controls more than 50% of a relevant market. The

Commissioner is empowered to issue declaratory proclamations, which serve as

evidence sufficient to establish fact until proven otherwise (prima facie evidence)

in any legal proceeding that the firm in question is indeed a monopoly. A suggested

amendment to the Antitrust Law, which is still in its infancy, is aimed to subject firms

with substantial market power to the Antitrust Law's monopoly provisions, even if

their market share falls short of 50%.

The main monopoly prohibitions are refusal to deal and abuse of dominant position.

The latter consists of (a) a general prohibition on abusing dominant position in a

manner that may decrease competition or harm the public and (b) certain actions that

are considered per se abuses of monopoly position (e.g., predatory pricing, tying and

price discrimination). The IAA can issue directives to monopolies in order to prevent

potential harm to competition or the public.

Concentration Groups

In order to cope with possible competition failures in oligopolistic markets, the

Israeli legislature introduced a major revision to the Antitrust Law several years ago.

The revision authorizes the Commissioner to declare that a group of competitors

dominating more than 50% of a market are a "concentration group," provided that (a)

there is limited competition or there are conditions for limited competition between

group members and (b) there are remedies capable of preventing harm to competition

or increasing competition in the market. With this authority, the Commissioner can

act as a super-regulator of the market and apply measures needed to increase

competition or prevent further harm (e.g., decreasing barriers to entry or expansion

/14/

by forbidding the use of long-term contracts, terminating facilitating practices such

as information exchanges). The Antitrust Tribunal is authorized to issue more drastic

instructions, such as mandating the divestment of holdings (even minority holdings)

in a competing firm.

Additional Competition Legislation

While the majority of competition regulation in Israel resides within the Antitrust Law,

there are legislative arrangements that deal with certain market characteristics and

regulate specific sectors (e.g., the food sector, the fuel industry, credit card companies,

etc.).

The Promotion of Competition and Reduction of Concentration Law (2013) deals

with three main areas: mandating that considerations relating to competition and

concentration be taken into account in the allocation of public assets (e.g., concessions

and licenses granted by the government), a prohibition on multi-layered corporate

holding structures and the separation between financial and non-financial assets. The

law is of increasing importance in public tenders.

Other developments and trends

Administrative enforcement regarding corporate officers

The past few years have witnessed the introduction of financial sanctions on individuals

for various violations of the Antitrust Law. Recent decisions indicate a gradual, yet

consistent increase in the level financial sanctions. The exact standards for applying

personal liability, as well as the scope of potential defense arguments, have yet to be

drawn up by the judiciary. However, the IAA’s desire to increase deterrence by way of

imposing personal sanctions is likely to give birth to standard-setting decisions in the

coming years.

Private enforcement

In recent years, there has been a significant increase in private enforcement of

competition law, most notably by way of class actions. The most common grounds for

such actions are either the alleged involvement in a foreign cartel (based on the claim

that such foreign cartel harmed competition in Israel) or an alleged excessive pricing

of goods and services by a monopoly. The class actions against alleged foreign cartels

are primarily based on decisions by foreign regulators against international cartels (in

particular, EU and US enforcement actions).

Plaintiffs seeking to bring private actions against alleged foreign cartel members in

Israel may face a substantial setback, due to the Supreme Court's recent decision

to uphold the longstanding rule denying plaintiffs the ability to serve a claim outside

of Israel’s borders on the foreign party when the alleged cartel was not carried out

in Israel. Advocacy for the amendment of the Civil Procedure Regulations (1984) to

explicitly allow extraterritorial service based on the damage inflicted in Israel following

the international cartel, might prove to be a game changer in this regard.

Recent decisions by the Central District Court acknowledged the excessive pricing by

a monopoly to be a legitimate and valid cause of action under the Antitrust Law. The

Supreme Court, however, clarified that this is still an "open question" and a "serious" one.

Due to the increasing interest of local plaintiffs seeking private enforcement through

antitrust-related class actions against international and domestic corporations, the

relevant case law is likely to continue to develop in the coming years.

/15/

Tadmor & Co. Yuval

Levy & Co.

Shai Bakal, Partner, Head of

Antitrust & Competition

Tadmor & Co. Yuval Levy & Co. is a leading Israeli law firm with a global perspective, dedicated to providing

sophisticated, first-rate legal advice to clients operating in all sectors of the economy.

The firm’s practice groups and lawyers are consistently recommended by international legal publications and

directories, including Chambers Global, Legal 500, Global Competition Review (GCR), Who’s Who Legal, IFLR1000

and by domestic legal directories. The firm's Antitrust and Competition practice group is recognized as competition

law experts in Israel and is ranked as a Tier 1 practice by all professional directories.

The Antitrust and Competition practice group was involved in virtually all major antitrust cases in recent years and has

an unmatched depth of experience in all areas of antitrust law. We represented approximately 20% of all multinational

filings to the Israel Antitrust Authority (IAA) in the last year (mergers and exemption requests). We are also known for

our unique expertise in class actions and litigation in connection with multinationals and offer unparalleled expertise in

several sectors, including shipping, pharmaceuticals and food.

The group was established by Dr. David E. Tadmor, the former Commissioner of the IAA and one of Israel’s top

commercial lawyers. Dr. Tadmor has over 20 years of experience and leads the practice group's team together with

Shai Bakal, the former head of the mergers team at the IAA, and another of the firm’s highly esteemed experts in this

field.

Shai Bakal is the head of the firm’s Antitrust and Competition group. Shai regularly advises and represents leading

corporations in Israel and abroad with respect to all aspects of complicated antitrust matters. He is well versed in

the issues facing all of the different sectors of the Israeli economy, particularly the pharmaceutical, food, shipping,

energy, retail, mass media and banking sectors. Shai has created and implemented antitrust compliance programs for

large Israeli companies and multinational corporations. He represents clients in complex antitrust litigation before the

Antitrust Tribunal and civil courts, including class actions, appeals and administrative petitions before the Supreme

Court. Shai also represents clients before various Israeli regulators.

Shai practiced law in the legal department of the IAA (2002-2007) where he was in charge of, among other areas,

the food sector, retailing and intellectual property. He was later appointed head of the IAA’s mergers team. During

his term at the IAA, Shai drafted several key policy documents, including the Antitrust General Director’s Premerger

Filing Guidelines and the Antitrust General Director’s Position on Commercial Arrangements among Suppliers and

Retail Chains.

CONTACT

INFORMATION:

www.tadmor.com

office: +972 3 684 6000

[email protected]

/16/

/17/

High-Tech

SHIBOLET & Co.

Lior Aviram

Vered Horesh

/18/

Recent Trends in

the Israeli High-Tech

Ecosystem

In terms of exits, 2017 is expected to become one of the most successful years in

Israeli high-tech history. Prominent examples are Mobileye (US$15.3 billion) Kite

Pharma (US$11.9 billion) Playtika (US$4.4 billion) and BeuroDerm (US$1.1 billion).

According to the IVC Research Center and the Israeli Innovation Authority (IIA) report,

total capital raised by start-ups during the past year was US$4.8 billion. The average

venture capital investment round was approximately US$7.2 million, 20% more than

the average of the previous five years. In addition, private equity funds investments

amounted to US$3.8 billion. Israeli VC fundraising activity in 2016 reached US$1.4

billion. Finally, growth trends of total high-tech exports in 2016 totaled US$43 billion.

In addition, in the past few years, we have witnessed a new phenomenon in the Israeli

high-tech ecosystem – domestic mergers and acquisitions. In 2016, about a quarter

of all M&A by Israeli technology companies were domestic.

Prominent examples are the US$2.5 billion acquisition by Wix of the Israeli start-up

Flok, which develops CRM solutions; the acquisition by the US$1 billion Taboola of

Commerce Science, which provides personalization and optimization on-site tools,

and Radware with a US$840 million market cap, which acquired the Israeli cloudbased

software company Securlet.

During the past year extensive legal changes were implemented to Israel’s regulatory

infrastructure to further enhance, solidify and bolster Israel’s high-tech ecosystem.

A significant development completed during the past year is the formation of the

"Israeli Innovation Authority," which replaced the "Chief Scientist Office in the Ministry

of Economy and Industry." The mission assigned to the IIA by The Encouragement

of Industrial Research and Development Law (1984) is to preserve and strengthen

Israel's global innovation leadership while increasing the resultant economic-social

yield. To that end, the IIA supports technology companies at all stages of their life

cycle and in various fields via a range of programs totaling approximately NIS1.6 billion

(~US$451 million) annually. The objective of the recent regulatory changes was to

allow the IIA to optimally fulfill such mission and provide efficient and high-quality

service to the Israeli innovation ecosystem. As part of its activity in 2017, the IIA

During the past year extensive legal changes were implemented to Israel’s

regulatory infrastructure to further enhance, solidify and bolster Israel’s hightech

ecosystem.

/19/

The new regulations will enable start-ups to raise capital in exchange for equity

without being considered a public offering and thus requiring the publication

of a full-blown prospectus and subjecting the company to broad disclosure

and reporting obligations.

published new directives allowing the licensing to foreign entities of domestically

developed Intellectual Property by companies who received governmental grants.

Until the adoption of such directives, licensing of such IP outside of Israel was

prohibited, forcing many companies to exit at early stages.

At the end of 2016 an amendment to the Law of Encouragement of Capital

Investments (1959) was passed, which reduced taxes for high-tech companies from

24% to 6-12%, depending on the company's nature. This amendment also instituted

additional tax benefits on dividends and capital gains. Furthermore, an amendment to

the Income Tax Ordinance (Amendment No. 239) was adopted, removing bureaucratic

obstacles and easing completion of high-tech companies' structural changes in Israel.

M&As are a key factor in the rapid growth of high-tech companies, enabling

acquisition of technologies and manpower to compete in the international arena.

The recent amendment expands the application of tax benefits to various structural

changes, and is expected to increase the attractiveness of M&A transactions for

both investors and companies. Moreover, earlier this year, the Israeli Tax Authority

(ITA) finally clarified the qualifications for implementation of the amendment of the

"Angels Law," which was first promulgated at the end of 2015. This law promised

to broaden tax benefit grants to individual investors at early stage technology

companies by allowing the deduction investments such as deductible expenses

against income from any source. However, no clear path for qualification for such

benefits was provided until the ITA circular was published in April 2017, which now

provides investors and early-stage companies with greater certainty.

Another progressive legal measure designed to adapt the law to the dynamic era

is Securities Regulations (Offer of Securities through Offering Coordinator (2016),

published by the Israeli Securities Authority (ISA). In recent years, fundraising through

crowdfunding platforms has gained increasing popularity. The new regulations will

enable start-ups to raise capital in exchange for equity without being considered

a public offering and thus requiring the publication of a full-blown prospectus and

subjecting the company to broad disclosure and reporting obligations. The regulations

include guidelines on both the amount a company may raise through crowdfunding

platforms and the amount an individual participating in such an investment may invest.

They also impose reduced disclosure and reporting obligations on a company electing

to raise funds from the crowd compared to public companies.

During the past year, new Privacy Protection Regulations (Data Protection 2017)

applicable to organizations – both in the public and private sectors – holding

database subject to registration obligations were approved. The regulations stipulate

a comprehensive and detailed arrangement regarding the physical and logical

protection of databases and the rules of management, access and modification of

databases, especially when an organization possesses sensitive personal information.

The regulations impose new duties for database management, including, for the first

time in Israel, reporting obligations in case of security breach. The regulations will

enter into effect in May 2018, forcing organizations to take immediate measures to

ensure timely compliance.

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Additional legislative change expected to affect the many Israeli technology

companies conducting business with the European Union is the entry into force of

the EU General Data Protection Regulation (GDPR) in May 2018. Some of the GDPR

requirements – calling for adjustments by relevant Israeli technology companies – are:

legal ground for data processing and consent; specific restrictions with respect to

sensitive data; extensive rights for data subjects and measures to ensure access to

information is performed only by an authorized person etc.

Distributed registration technologies, primarily blockchain, are technological

infrastructures enabling users to share an online decentralized database of

transactions supported by encrypted data. Such technologies, services and products

are gaining stellar momentum worldwide.

In the first half of 2017, approximately US$1.5 billion was raised through the issuance

of digital coins, mostly coupled with the promise of the issuers to enable participants

to buy underlying services and products. The volume of capital raised in this manner

is expected to significantly increase in the years to come. Israel is considered a

global leader of the industry, with a number of companies offering cutting-edge

technologies in this field. These include Bancor, which carried out one of the largest

token offerings worldwide to date with US$153 million raised. At the same time, fraud

and manipulation leading to losses to investors are of concern to Israeli regulators, as

they are to their peers. Recently the ISA announced the commission of a committee

to examine the applicability of securities laws on digital coin offerings, issuing and

trading in Israel based on decentralized registration, primarily blockchain.

Today, most of the capital invested in Israeli technology companies derives from

foreign capital. To induce Israeli institutional investors to increase their investments

into local technology companies, the Accountant General and the ISA issued a joint

initiative offering high-tech investment funds government protection against losses

and leveraging investment funds by government debt financing. The first tender for

investment funds under the initiative was published in mid-2017 and is expected

to result in the formation of four new Israeli investment funds, with additional funds

under the initiative becoming a new source of capital, strengthening the ecosystem.

There is no doubt 2018 will see some important legislative changes and probably,

new records will be set for Israeli high-tech industry investments and exit volumes.

Imminent challenges and creative solutions await the domestic ecosystem with rapid

evolvements in the blockchain scene. Stay tuned.

/21/

Shibolet

& Co.

Shibolet, established in 1973, is one of Israel’s largest, full-service multidisciplinary law firms with a strong emphasis on

corporate transactional work and commercial litigation. Based in the heart of Tel Aviv, Israel’s commercial and financial

center, the firm offers its clients legal services in all fields of commercial/corporate law on a worldwide basis, combining

high professional, personal service and a deep understanding of client affairs. With the expertise of more than 130

professionals, the firm’s areas of specialization are M&A, high-tech, life sciences, securities and capital markets,

IP, project finance, real estate and infrastructure, tax, employment, antitrust, banking and financial institutions and

media and entertainment. With over half of its practice being high-tech related, Shibolet's High-Tech and Venture

Capital practice is among the largest and most recognized in Israel. For over three decades, the firm has represented

entrepreneurs, start-ups, mature technology companies, venture capital funds, multinationals, angel investors and

corporate investors for all their M&A and other transactional and financing needs.

Shibolet has acted as legal adviser to the Technological Incubator Program of the Office of the Chief Scientist (OCS) since

its inception, and has served for many years as special counsel to the OCS. The firm represents a number of privatized

technological incubators. Shibolet also boasts extensive expertise in structuring alliances, joint development and joint

venture agreements among high-tech companies and in the negotiation and drafting of complex technology and IPrelated

transactions, including licensing and OEM agreements.

The firm also has special expertise in representing universities and academic research institutions in regard to technology

transfer matters. Shibolet's High-Tech practice has dedicated expertise in most high-tech sectors in Israel including

semiconductors, communications, enterprise software, mobile applications, gaming, internet and new media, cleantech,

medical devices and the life sciences. Probably more than any other firm in Israel, Shibolet's high-tech partners have vast

experience in cross-border transactional work, representing clients from the U.S., Europe, China, Japan, Korea, India and

many other countries in Asia and Africa.

Lior Aviram is the head of Shibolet & Co.’s High-Tech and Venture Capital practice. Lior is recognized as a leading expert

in venture capital and strategic investments and in the structuring and establishment of venture capital funds. He also

specializes in complex, cross-border M&A and capital markets transactions, having been a lead counsel in some of the

most innovative transactions in the Israeli market.

Vered Horesh specializes in high-tech and venture capital, with particular expertise in internet, mobile, new media and

gaming domains. Vered has extensive experience in the formation of venture capital funds and in representing venture

capital funds in their investment activities in portfolio companies. She also has vast international experience representing

mainly U.S. corporations and venture capital funds in their investments and M&A transactions in Israel.

Lior Aviram, Head of High-Tech and

Venture Capital

Vered Horesh, Partner

CONTACT

INFORMATION:

www.shibolet.com

office: +972 3 567 8910

[email protected]

[email protected]

/22/

/23/

Intellectual

Property

Dr. Ilan Cohn

Orit Gonen

REINHOLD COHN GROUP

Reinhold Cohn & Partners,

Patent Attorneys

Gilat, Bareket & Co.,

Attorneys at Law

/24/

IP Law in Israel -

Overview

Intellectual property (IP) is a key economic driver of the innovative Israeli economy.

IP-related business activity, including the development and sale of IP-based

technologies and products, out-licensing of IP, investment in IP-based ventures and

the acquisition of such companies, have played a major role in creating a robust local

economy with a high GDP and large foreign currency reserves. It is Israel’s IP-friendly

legal environment and thriving entrepreneurial community that have facilitated this

huge national transformation.

Although there are no specialized IP courts in Israel, the courts are IP-friendly.

Regarding counterfeits, for example, rights holders can enforce their IP rights with the

availability of expeditious judicial interim injunctions and the possible assistance of

governmental agencies such as the police and the customs authority.

Patents and Designs

The Patents Law (1967) is an original Israeli statute incorporating such principles

as the requirement for absolute novelty and has been amended to reflect Israel’s

international obligations, such as the Patent Cooperation Treaty. Amended in 2011-

12, the Patents Law saw a wave of substantial changes, including the introduction

of early publication of patent applications. A patent application and its file wrapper

will now be open for public inspection after 18 months from the filing (or priority)

date. The amendment also introduced the right to collect reasonable damages for

infringements that occurred between early publication and publication of the patent

application’s acceptance. In January 2014, the Patents Law was amended again,

introducing a significant reform in the patent term extension (PTE) system.

Industrial Designs in Israel are currently protected under the Patents and Designs

Ordinance (1924), which supports concepts such as local novelty; however, on

August 7, 2018 a new Design Law will come into force replacing the old Ordinance

(which will still govern designs filed before the inaction of the new law). The new

Design Law is inspired by European Union and British legislation and incorporates,

mutatis mutandis, some of the definitions of said laws. Among other changes, the

new Design Law replaces the requirement for "novelty or originality" with a cumulative

requirement for "novelty and individual character." A design will be considered as

having "individual character" when the general impression it creates on the informed

user differs from the general impression created by a prior design. The duration of

protection of registered designs filed on or after the new law comes into force will

be 25 years, counted from the Israeli filing date and subject to periodic renewals.

/25/

Registered designs filed before the coming into force of the law will be eligible for an

additional third renewal term of three years (totaling 18 years, instead of 15 years),

subject to payment of the prescribed official fees.

The new Design Law replaces the requirement for absolute novelty. Thus, a design shall

be considered new if an identical design or a design that differs only in unsubstantial

details was not published in or outside Israel, before the determining date (subject to

certain internet publications).

Under the new Design Law, a design that is novel and has an individual character may

be protected as an unregistered design (for a term of three years), subject to some

requirements. The unregistered design right affords its proprietor the right to prevent

the manufacturing for commercial use of a product that copies the design or that

creates an overall impression on the informed user that is not different from the overall

impression created by the product subject of the design.

Trademarks, Appellations of Origin and Trade Secrets

The British Trademarks Ordinance, introduced in 1938, governs the protection of

trademarks in Israel. The ordinance has undergone several amendments primarily aimed

at implementing Israel's international obligations under treaties and conventions, such

as the TRIPS Agreement (the Agreement on Trade-Related Aspects of Intellectual

Property Rights), while recent amendments ensured conformity with the Madrid

Protocol. The British Merchandise Marks Ordinance provides for criminal liability for

designating goods by a false commercial description or counterfeit trademark, providing

additional protection to registered trademarks.

Appellations of origin and geographical indications are governed by the Protection of

Appellations of Origin (Geographical Indications) Law (1965).

The Commercial Torts Law (1999) regulates the protection of trade secrets and also

provides protection against passing off, false commercial descriptions and other

business-related torts having a bearing on IP litigation.

Copyright

Israeli copyright law (including protection of software) is governed by the Copyright Law

(2007). The British Copyright Ordinance (1924) regulates private copying of copyrighted

works on blank tapes (recordable media other than for computer use). The protection of

mask work rights derive from the Protection of Integrated Circuits Law (1999).

The neighboring rights of performers and broadcasters are addressed in the Performers

and Broadcasters Rights Law (1984).

Israel’s IP protection is further shaped by other statutes and regulations relevant to various

specific aspects of IP protection and by a constantly evolving body of case law.

Online Issues

The liability of online service providers, including the obligation to remove infringing

materials, is an evolving issue. There are cases in which the courts have ordered local

internet service providers to block access to websites located outside of Israel and

to disclose the identification of infringing users. We also encounter cases in which

the court refused to provide such an order in the absence of specific legislation. The

matter has yet to be decided by the Supreme Court.

/26/

The Israeli Ministry of Justice recently published a new draft bill that will allow the

courts to issue orders for the removal of illegal content from the web even when the

author is unknown. The bill includes the authority to penalize social media networks

that do not immediately delete posts supporting terror attacks.

Administrative Changes

Since 2009, the Israeli Patents and Trademarks Office (IPO) has improved its

computerized systems in line with the Madrid system.

Under a newly signed agreement between the U.S. Patent and Trademark Office

(USPTO) and the Israeli Patent Authority (IPA), the IPA was declared as an International

Searching & Examining Authority (ISEA) for PCT applications filed at the USPTO.

This reflects recognition by the USPTO of the quality of the search and examination

conducted by the IPA, which will be available for international applicants soon.

The Global Patent Prosecution Highway (GPPH) is a program to accelerate procedures

in one country based on favorable examination in another. The IPA is one of the 17

participating offices and, consequently, new, accelerated procedures are now available

to applicants of Israeli patent applications. Similarly, success in the examination of an

Israeli application may accelerate prosecution in other participating states.

Controversial Developments

Loss of a Trademark due to Failure to Register an Authorized User

In Israel, trademark rights are acquired primarily through use; however, registration is

key to acquiring the right to sue for trademark infringement (other than in the case

of well-known trademarks), although an action for passing off may be available to

the owner of an unregistered mark. Furthermore, registration of an authorized user

is necessary for the continuing validity of the registered owner's trademark lest the

mark become susceptible to cancellation due to a three-year period of non-use.

Patent Protection of Business Methods and Software

The practice of the Israeli Patent Office has been relatively conservative recently in

that methods of doing business cannot be protected by patents. Regarding softwarerelated

inventions, the applicable patentability standards are in a state of uncertainty.

Generally, the prospects of getting a patent for a software-related invention (other

than a business method) are similar to those of the European Patent Office.

Parallel Importation

Israel allows parallel importation, namely the importation of genuine goods from a

country in which they are legitimately marketed. This provides a route by which an

importer, other than the one appointed by the rights owner (parallel importers), may

import genuine goods into the country. The Israeli Supreme Court has defined the

scope of permissible use of registered trademarks by parallel importers, adopting a

relatively liberal approach to parallel importation and to the freedom to use another's

trademark in this context. The Court imposed restrictions on the activities of the

parallel importer inter-alia forbidding the creation of confusion as to endorsement by

the trademark owner.

The various aspects of IP protection in Israel are based on a variety of laws and case

law that have been and continue to be revised and updated in line with technological

and international developments. Through its national legislation, and as a party

to international treaties and conventions, Israel provides a safe and supporting

environment for the protection of IP rights.

/27/

Reinhold Cohn

Group

Reinhold Cohn Group is the leading Intellectual Property consulting firm in Israel. RCG offers expertise in a full breadth

of IP-related services including: protection, asset management, due diligence, litigation and legal services in all areas

of IP such as patents, trademarks, designs, copyrights, open source, plant breeders' rights, etc.

The Group includes the patent attorneys firm Reinhold Cohn & Partners and the law firm Gilat, Bareket & Co. RCG

and its team of professionals are internationally renowned for excellence and are continually ranked in the top tiers

in leading international and local guides such as: Managing Intellectual Property, Chambers & Partners, Legal 500,

WTR1000, Who's Who Legal, IAM 300, IAM 1000, Expert Guides, D&B Israel and BDI.

RCG takes pride in the diversity of its clients including multinational corporations, Fortune 500, large Israeli companies,

NASDAQ and other stock exchange companies, academic institutions, start-ups, investors, VC's, funds, scientists and

entrepreneurs.

Dr. Ilan Cohn, Patent Attorney, is a world-renowned expert in IP strategy and the use of IP as a business asset. Ilan

serves clients in a wide range of technological and industrial fields and also assists clients in IP-based deals. He advises

on the preparing of a customized roadmap for using IP as strategic assets, representing companies who are operating

in or looking to expand to the Far East.

Ilan helps to establish IP-based companies, developing a company’s IP into assets that yield profits to investors and

shareholders. He serves on the board of directors of several such companies and as a member of the investment

committees of venture capital funds and technological incubators.

Orit Gonen, Attorney at Law, has extensive professional experience in managing major cases, providing counsel,

opinions and litigation advice. Her practice comprises vast knowledge of civil, commercial and labor law and she also

regularly handles litigation before the Israeli Patent Office.

Orit advises international and Israeli companies, as well as start-ups, foreign companies with Israeli representatives and

private clients.

CONTACT

INFORMATION:

www.rcip.co.il/en

office: +972 3 710 9333

[email protected]

[email protected]

Dr. Ilan Cohn, Senior Partner, Reinhold

Cohn & Partners

Orit Gonen, Partner, Gilat, Bareket & Co.

 

/29/

International

Arbitration

GIDEON FISHER & CO.

Gideon Fisher

Daphna Fisher

/30/

The Israeli judicial system has for many years been overburdened by the volume of

cases that it has to hear. Statistics produced by the courts' management in 2016

stated that by the end of 2015, the average volume of cases per judge, per year in

the Magistrate Court was 1,650 (a bench of 411 judges). In the District Court, it was

350 (a bench of 179 judges). This problem is accentuated by the fact that many cases

can be extremely lengthy, often stretching over many years. This reality has negatively

affected the rights of all parties involved in court proceedings, as well as damaging the

reputation of the court. Thus, there is a pressing need to reform the system to ensure

the courts have sufficient resources and time to deal satisfactory with all cases.

Commentators agree that the most efficient and productive solution to this problem

would be to promote the use of "alternative dispute resolution" (ADR). ADR involves

disputes being resolved outside of court by one or more experts – known as

arbitrators (usually a former judge or lawyer) – and is finalized by an "arbitral award,"

which is legally binding on both sides and enforceable by the courts. To be binding

and effective, arbitration must either be agreed upon voluntarily by contract or

mandatorily enforced by statute. Since, in many cases, parties are not willing to enter

into arbitration, statutory intervention is often necessary to enforce its use.

Concerns that the workload of the courts was increasing disproportionately to

what they could realistically handle started to emerge around a decade ago. This led

to a bill being proposed in 2011 that aimed to amend the Courts Law (1984) and

impose mandatory arbitration on parties involved in new civil cases submitted to the

Magistrate Court, as well as cases waiting for their hearing.

According to the outline proposed in the bill, the president of the court and the

president’s deputy would have the right, without the prior consent of the parties

involved, to forward civil cases to arbitration proceedings. Several categories of civil

claims, including tort cases, would be excluded from the bill, and the Minister of Justice

would have the right to further limit the categories of claims to which mandatory

arbitration applies.

Turning Theory into

Practice: The Struggle

for Mandatory

Arbitration in Israel

This reality has negatively affected the rights of all parties involved in court

proceedings, as well as damaging the reputation of the court. Thus, there

is a pressing need to reform the system to ensure the courts have sufficient

resources and time to deal satisfactory with all cases.

/31/

A special committee would select the arbitrators and recommend them to the

Minister of Justice. The committee would have the power to disqualify arbitrators

where appropriate. The potential arbitrator would be a retired judge or lawyer who

met the required conditions to be appointed as a district judge, having no criminal

past or disciplinary record, and most importantly, having no conflict of interest in any

case in which he or she would be involved. Decisions by arbitrators would be open to

public review, unless otherwise decided by the court. The bill also determined that the

court's fees would pay the arbitrator's remuneration, with the balance being paid by

the State Treasury.

The bill was met by stiff opposition, including from former Supreme Court President

Dorit Benisch who argued that the requested change amounted to a privatization of

the judicial system, which would blur the gap between the public sector and private

sector. Furthermore, opponents to the bill argued that the right of every individual to

have access to the court must not be infringed upon, as this ensures that cases are

conducted in a pre-defined, fair and egalitarian way that prevents arbitrariness, which

would not be guaranteed in arbitration proceedings. In view of these objections and

the then-forthcoming elections, the bill was put on hold.

Between 2011 and 2016, MK Yariv Levin initiated an additional bill to amend the

Arbitration Law (1968) and the Courts Law (1984) to include mandatory arbitration

that focused on claims relating to construction defects and property damage caused

by road accidents. Similar to the previous bill, the main motive behind this bill was to

streamline court hearings and reduce the heavy burden placed on them.

Due to the 2008 amendment to the Arbitration Law, which enabled parties to

appeal an arbitral award, MK Yariv Levin highlighted that the arbitration procedure

would become more comfortable and risk-free for the parties involved. In addition,

procedures would be shortened, costs reduced and the overall experience would

become more pleasant for those involved. Another advantage of the proposed bill

would be to reduce the common situation of one party (usually the defendant),

avoiding settling the dispute, knowing that legal proceedings in court take an

average of up to four years to be resolved. This tactic often unfairly disadvantages

the plaintiff. By implementing a mandatory arbitration system, the opportunity to

engage in this practice would be reduced. However, this bill was also put on hold.

Another failed attempt to establish a mandatory arbitration system was a 2016

initiative of MK Moshe Kahlon (Minister of Finance) and the Commissioner of the

Capital Markets Insurance and Savings Division in Israel. They attempted to introduce

a bill establishing a mandatory arbitration institution to make it easier for insurance

policyholders to deal with unnecessary postponements of their claims by insurance

companies. The background of this initiative was the fivefold increase in the number

of claims the insurance companies had rejected over the years. The aim was to bring

forward a statutory arbitration system, financed by the insurance companies, that

would include independent professionals to decide whether a rejection was justified.

Due to pressure from powerful insurance companies that stood to lose from this law,

the Minister of Justice declined to introduce the bill into the statute book.

Furthermore, opponents to the bill argued that the right of every individual

to have access to the court must not be infringed upon, as this ensures that

cases are conducted in a pre-defined, fair and egalitarian way that prevents

arbitrariness, which would not be guaranteed in arbitration proceedings.

/32/

In addition to efforts to impose mandatory arbitration as an alternative to court

proceedings, attempts have been made to introduce mandatory arbitration for other

kinds of disputes, especially between employees and employers in the public sector.

At the end of 2011, MK Aryeh Eldad proposed a bill to amend the Settlement of

Labor Disputes Law (1957) and enforce mandatory arbitration in cases of labor

disagreements in the public sector. The initiative for the bill emerged from an ongoing

dispute between employees and employers in the health system in Israel and aimed

to balance the essential right of employees to strike and to safeguard against abuses

by employers on issues such as wage reductions and safety conditions.

Subsequently, numerous MKs have submitted similar bills attempting to reduce strikes

by public sector workers for essential services by imposing mandatory arbitration, but

with limited success.

More recently, mandatory arbitration in this field has gained support from Prime

Minister Benjamin Netanyahu, who sees imposing mandatory arbitration into Israeli

law as a top priority. However, even his attempts in the current coalition to promote

the enactment of such a bill to amend the Settlement of Labor Disputes Law (1957)

have so far failed due to firm opposition by MK Moshe Kahlon and others.

In conclusion, having witnessed so many failed attempts to introduce legislation

imposing mandatory arbitration, one is inclined to remain skeptical about the possibility

of it being successfully introduced in the near future. In light of this, one may suggest it

would be best to concentrate efforts on other ways of reducing the courts’ workload,

such as improving the efficiency of the judicial system and decreasing the number of

lawyers (data stated that at the end of 2015, for every 100,000 citizens there were

900 lawyers and eight judges). However, although these objectives are commendable,

it still holds true that in the long term, the best way to create a sustainable and efficient

judicial system is to find a system of mandatory arbitration procedures attractive to

the public, politicians and industry leaders alike that will position arbitration as an

integral parallel procedure alongside the Israeli courts.

More recently, mandatory arbitration in this field has gained support from Prime

Minister Benjamin Netanyahu, who sees imposing mandatory arbitration into

Israeli law as a top priority.

/33/

Gideon Fisher & Co. is a premium, full-service law firm based in Tel Aviv. Founded over 20 years ago by Gideon Fisher,

the firm has steadily developed into one of the leading law firms in Israel. It offers a full spectrum of services in all areas

of commercial law and litigation while always remaining sensitive to the client’s objectives and legal environment, both

local and international. The firm also prides itself in offering strategic guidance and representation in administrative

matters, representing municipalities, agencies, individuals and corporations in audits and other proceedings.

The firm attracts talented, professional and credentialed attorneys who are focused and dedicated to achieving

optimal results for their clients, as well as providing the highest level of service and responsiveness. The firm is

composed of several departments, including Litigation, Commercial, Arbitration and Dispute Resolution, Local

Authorities, High-Tech, Real Estate and Family Law. Its creativity and out-of-box approach has allowed it to thrive,

even in extraordinary challenging cases, making it an industry leader in crisis resolution. The firm's client-oriented

approach not only focuses on the legal aspects, but also the potential financial ramifications and the public relations

implications of each case.

In the domestic directories BDI and Dun's 100, the firm is ranked in the field of litigation and arbitration, administrative

law, labor law, local authorities law and sports law. The firm's clients include leading players in Israel’s economy and

society such as the JNF, the Airports Authority, Eilat Ashkelon Pipeline Co. Ltd., Zaka (rescue and recovery organization),

Journalist Association, Israel Postal Company, leading kibbutzim, local authorities, municipalities, governmental

entities, senior ministers, media personalities and well-known business figures.

Gideon Fisher is the founder and senior partner of Gideon Fisher & Co., with legal expertise of over 25 years. He is

a former member of the International Court of Arbitration of the International Chamber of Commerce in Paris (ICC),

a former member of the International Committee of the Israel Bar Association and a CIArb Fellow. Gideon lectures

in and is head of the Arbitrators Training Center at Bar Ilan University, which on completion of the course, provides

an academic diploma to graduates. He is currently completing his doctorate studies at Bar Ilan University. Gideon’s

dissertation will be drawn from his studies and research into the lack of arbitration in Israel's business world.

Daphna Fisher is a senior partner in Gideon Fisher & Co., with legal experience spanning over 20 years. Daphna

is recognized in the field of arbitration, having spent 10 years as an assistant and arbitrator alongside Dr. Eliyahu

Winograd, former president of Tel Aviv Magistrate Court and retired Supreme Court Judge, in major arbitrations, such

as the case of an Infrastructure Company v. The State of Israel. Daphna was also involved in cases handled in ICC

and LCIA, ranging from tens of millions up to 100 million euros in compensation. Daphna excels in high-profile tort

cases covered by the Israeli media. Pro bono, she serves as the chairperson of Friends of Hadassah (leading hospital)

International in Israel.

Gideon Fisher

& Co.

CONTACT

INFORMATION:

www.fisher-lawfirm.com

office: +972 3 691 3999

[email protected]

[email protected]

Gideon Fisher, Partner

Daphna Fisher, Partner

/34/

www.iclg.com

Time for some cross-border expertise.

To enquire about participating in the International Comparative Legal

Guide series or obtaining copies of any of our publications, please

contact us on +44 207 367 0720 or by email at [email protected]

You’re in Moscow.

His client is in Dubai.

The International Comparative Legal Guide series provides current and practical comparative legal

information in 46 practice areas across 138 jurisdictions. Each guide follows a Q&A format, giving

detailed analysis of each topic for multiple legal systems worldwide.

To read any of the titles in the ICLG series, visit www.iclg.com.

ICLG International Comparative Legal Guides

@ICLG_GLG The International Comparative Legal Guides are published by: glg global legal group

Your client is in Tel Aviv.

/35/

Fischer Behar Chen Well Orion & Co

Labor and

Employment

FISCHER BEHAR CHEN

WELL ORION & CO

Shay Teken

Moran Friedman

/36/

Israeli labor law is a breathing entity, constantly evolving through new legislation and

labor court rulings. Below we set out a general overview of certain basic rights granted

to employees under Israeli labor laws, as well as certain recent developments in the

Israeli labor and employment arena. For businesses looking to operate in or expand to

Israel, the following laws are among the most important with which to be familiar.

Workweek and Overtime: The Work and Rest Hours Law (1951) establishes the right

of an employee to receive compensation for overtime (defined as working beyond nine

hours a day and weekly beyond 43 hours) and restricts the employment of an employee

on weekly rest days. For the first two hours of overtime, an employee is entitled to

125% of the hourly salary. For each additional hour thereafter, the employee is entitled

to 150% of the hourly salary.

Payment of Salary: The Salary Protection Law (1958) provides that an employer shall

pay employee salaries by no later than the ninth day of the calendar month following the

month in which wages were earned.

Annual Vacation: The Annual Vacation Law (1951) provides a minimum annual leave for

employees ranging from 15 to 28 days, based on seniority. The law provides that up to

a maximum of two years of unused vacation days are redeemable upon termination of

employment.

Sick Leave: The Sick Leave Payment Law (1976) provides that employees are entitled

to sick leave payment such that one and a half days of sick leave are earned for each

month of employment, up to a maximum of 90 days. The employee is not entitled to

compensation for the first day of sick leave, compensation is set at half pay for the

second and third days, and thereafter the employee is entitled to full pay. Unused

accumulated sick days may not be redeemed.

Convalescence Pay: According to the General Extension Order Regarding Payment of

Convalescence, employees are entitled to convalescence payments (from five to 10

days per year) based on their seniority.

Israeli Labor and

Employment Law:

What Every Employer

Needs to Know

Israeli labor law is a breathing entity, constantly evolving through new legislation

and labor court rulings.

/37/

Pension Insurance: Every employee in Israel is entitled to pension insurance consistent

with an Extension Order issued by the Minister of Economy. According to the Extension

Order, employers must contribute 6.5% of an employee’s gross salary to a pension

plan (the rates may be slightly different if the employee chose a "manager insurance

policy") and 6% of an employee's gross salary as severance pay, with the employee also

contributing 6% toward the pension plan. Generally, an employer must make provisions

for pension insurance after the employee has been employed for six months. However,

if the employee had a pension plan with a previous employer, the employee is entitled to

the pension arrangement as of the first day of work.

Severance Pay: Under the Severance Pay Law (1963), an employee who has completed

a full year of employment and is terminated by the employer is entitled to one month

of salary per each year of employment based on the monthly salary at the time of

termination. However, Section 14 of the Severance Pay Law provides an alternative

whereby an employer is exempt from the severance pay obligation in cases of dismissal.

This would apply if the employer implements an arrangement according to Section 14,

in which the employer makes monthly payments out of the employee's monthly salary

towards a pension plan in the name of the employee, which includes a component of

severance pay and a component of pension payment. The amounts accrued in the

severance pay component may be substituted for the statutory amount if the employer

and employee agree to the Section 14 arrangement in writing; provided, however, that

the funds be released to the employee even if the employee resigns.

Termination - Prior Notice: The Prior Notice for Resignation and Dismissal Law (2001)

stipulates specific minimum periods of prior notice that employers must provide

employees before a dismissal. During the first year of employment, the period varies

from one day to 21 days based on the length of employment. Following the first year of

employment, the period is set at one month. According to Israeli National Labor Court

rulings, an employer who wishes to transfer ownership of its business to another entity

should provide prior notice to employees.

New Legislation: Enhanced Parental Rights

During the past year, the Israeli parliament (the Knesset) enacted three important law

amendments that strengthen parental rights.

The first amendment – Amendment 56 to the Employment of Women Law (1954) –

sets clear criteria, compared to those that existed previously, with regard to the eligibility

of women and their spouses to a shortened work day in the period following the return

from parental leave. Previously, the law provided that an employee was entitled to be

absent for one hour per day from her employment – the parental hour – during the first

four months following the end of the parental leave period, on condition that she is

employed in a full-time position.

Under the law, if certain conditions are satisfied, a male employee who is employed in

a full-time position is entitled to exercise the parental hour alone or, alternately, with

his spouse. The law conditions such rights on having a full-time position; however, the

law does not define "full-time position" (general full-time employment amounts to 186

work hours per month). The recent Amendment defines "full-time position" for purpose

During the past year, the Israeli parliament (the Knesset) enacted three

important law amendments that strengthen parental rights.

/38/

of exercising a parental hour right as the lesser of what is custom in the employee's

workplace, or at least 174 hours per month for the woman or her spouse.

The second amendment – Amendment 57 to the Employment of Women Law –

relates to childbirth allowance provisions in the National Insurance Law (1995). The

period to receive childbirth allowance was extended by one week – from 14 to 15

weeks. For the avoidance of doubt, no change was made to the total maternity and

parental leave period for an employee with at least one-year seniority, which stands

at 26 weeks. In addition, the entitlement of male employees to divide the maternity

and parental leave period with their wives was expanded in the following ways: (a) an

employee whose wife gave birth may divide the maternity and parental leave period

with his wife for the period remaining after the first six weeks following the birth;

according to the Amendment, the minimum absence period that a spouse must be

absent for in order to be entitled to the childbirth allowance was shortened from

three weeks to seven days, (b) an employee whose wife gave birth may use seven

days of parental leave at the same time as his wife's maternity leave and receive the

childbirth allowance – provided that his wife waives such payment for the final week

for which she is entitled to receive such allowance and (c) an employee whose wife

is an independent contractor and who is entitled to the childbirth allowance, will be

entitled to split the maternity and parental leave period, similar to the entitlement of

a spouse whose wife is a salaried worker (until now the entitlement to the childbirth

allowance was only available to an employee whose wife was a salaried worker). The

amendments are part of a larger trend to grant equal childcare rights to men – a move

from "maternity" rights for women alone to "parental" rights given to both men and

women.

The third amendment – Amendment 58 to the Employment of Women Law – permits

an employee, on certain conditions, to be absent from work for one hour each day

when her spouse is on army reserve duty service, commencing from the first day

of such reserve duty service. Such permitted absence is not deducted from the

employee's salary and it is in addition to work breaks under the Hours of Work and

Rest Law. The absence entitlement for reserve duty shall also apply, mutatis mutandis,

to a male employee whose spouse has reserve duty.

As evidenced by the amendments to the Employment of Women Law, the Israeli

legislator, as well as the labor courts, is strengthening parental rights of employees in

Israel.

The amendments to the Employment of Women Law are part of a larger trend

to grant equal childcare rights to men – a move from "maternity" rights for

women alone to "parental" rights given to both men and women.

/39/

Fischer Behar Chen Well Orion & Co (FBC), founded in 1958, is one of Israel’s premier and largest full-service law firms.

FBC acts for prominent multinational and Israeli clients (in the practice areas noted below and in a wide spectrum of

industry sectors) and offers professional excellence and personal attention across the spectrum of multidisciplinary

legal services. With over 200 lawyers and other professionals, FBC is repeatedly ranked by international and domestic

directories among Israel’s leading practitioners in many areas, including by Chambers and Partners, Legal 500, IFLR1000,

Global Competition Review, World Tax, BDI and Dun & Bradstreet.

FBC has one of the most active, involved and visible Labor & Employment practices in Israel. It represents employers

and employees, labor organizations and unions, and workers committees in various industries. It handles the full scope of

labor and employment matters, including collective bargaining, labor disputes, strikes and organized actions, collective

agreements, collective litigation, employer-employee litigation, labor contracts, employment agreements, separation

agreements, labor relations, due diligence, mediation and arbitration. The practice is active in legislative initiatives and

works closely with members of parliament in drafting bills and regulations.

FBC’s Immigration law team, part of the Labor & Employment practice, has extensive experience in providing

comprehensive strategic consulting, as well as guiding clients through application and filing (and, if needed, appeal)

processes.

Practice Areas: Arbitration & Mediation | Aviation, Maritime & Tourism | Banking & Finance |Capital Markets | Class Actions &

Derivative Suits | Competition & Antitrust | Cyber & IT | Environmental | Hi-Tech, Technology & Venture Capital | Immigration

| Insolvency & Restructuring | Intellectual Property | Labor & Employment | Life Sciences & Healthcare | Liquidation &

Receivership | Litigation | Mergers & Acquisitions | Natural Resources, Oil & Gas | Planning & Zoning | Private Asset Management

| Private Equity | Project Finance & Energy | Real Estate | Regulatory | Sports Law | Tax | Telecom & Media | White Collar

Shay Teken is a partner and the head of FBC’s Labor & Employment practice, specializing in all aspects of labor and

employment law. He has been involved in Israel's most significant changes in labor relations and labor law precedents in

recent years. Shay serves as chairman of the Labor and Employment Forum of the Israeli Bar Association and is frequently

consulted by Israeli regulators and legislators to develop and comment on proposed legislation and regulations. He

appears frequently before committees of the Israeli parliament regarding labor matters. Prior to joining FBC, Shay acted

as chief legal adviser and head of the legal department at the Histadrut, Israel's largest trade union federation, and as

chairman of its organizing wing. He continues to act as a special consultant to its legal department.

Moran Friedman is an associate in FBC’s Labor & Employment practice where she specializes in all aspects of labor

and employment law. Prior to joining FBC, Moran served in the legal department of the Histadrut.

Fischer Behar Chen

Well Orion & Co

CONTACT

INFORMATION:

www.fbclawyers.com

office: +972 3 694 4111

[email protected]

[email protected]

Shay Teken, Partner

Moran Friedman, Associate

/40/

IVC Research Center is Israel's leading research center specializing in analyzing and

monitoring Israel's high-tech industry. IVC’s flagship product, The IVC-Online

Database, is the most comprehensive resource on Israel's high-tech industry. The

IVC-Online Database includes information on over 8,000 Israeli high-tech companies

and foreign R&D centres, thousands of venture capital and private equity funds,

accelerators & incubators, angel investors and professional service providers’ entities.

In addition, the database provides news updates, topical articles, press releases and an

advanced search engine allowing fast access to its wealth of data collected and

researched by the IVC team.

Our data collection is based not only on public sources, but on direct interaction with hightech

companies, executives and investors. IVC Database is updated on a daily basis, by a

team of information professionals. We have access to information that cannot be found

elsewhere, based on our industry affiliations and diligent efforts, as well as our proprietary

information collections and analysis tools. In many cases we gain access to detailed

information that non-professionals would find very difficult – if not impossible – to attain.

IVC products & services

IVC's database

http://www.ivc-online.com is a subscription based service to those seeking to touch base

with the Israeli High Tech and Venture Capital industry. It contains details about more than

8,000 Israeli high-tech companies, venture capital funds, investment companies, Angel

investors, professional service providers, foreign investors, technology incubators and more

than 40,000 Key Executives. For each company, we present information on its main

technology, products phase, business description, financing rounds, management team

(including contact details - email, mobile, current & previous positions and short bio)

company stage and news and press releases.

IVC Industry Analytics

IVC Industry Analytics (IA) is our BI tool, which serves as a premium extension to IVC-Online

membership, with insights and macro level analysis of the IVC-Online Database. IVC IA packs

a lot of information into an interactive tool providing insights on deals, averages, sectors and

much more. IVC IA dashboards offer insightful, interesting and actionable information that

you can export to Excel, drill down, adjust, or just copy and paste as picture directly into

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/41/

Litigation

AGMON & Co. ROSENBERG

HACOHEN & Co.

Uri Sorek

Tal Mayshar

/42/

Systems and

Trends in the

Israeli Judiciary

The judiciary in Israel is based on three levels of courts: The Magistrates Courts, the

District Courts (including the Economic Division) and the Supreme Court. Alongside

the general court system, there are also special courts such as the Family Courts,

Administrative Affairs Courts, the Labor Courts, the Maritime Court and more.

The normative system in Israel comprises the basic laws, which stand at the top of the

pyramid; ordinary laws, which are enacted by the Knesset, and secondary legislation

(regulations and decrees) the vast majority of which are prescribed by government

ministers. The Israeli judicial system is based extensively on case law of the various

courts. Rulings by the Supreme Court constitute binding precedents for all the lower

courts; however, the Supreme Court has the authority to change its precedents.

Rulings of the District Courts have guiding power vis-à-vis lower courts.

Conducting Legal Proceedings in Israel

The obvious challenge of legal proceedings in Israel is time. Like many others, the judiciary

is overloaded and legal proceedings can take a few years. One notable trait of the Israeli

courts is a striking preference for substance over procedure. This stance is reflected, for

example, in the preference for clarifying claims on their merits and not dismissing them

on procedural arguments. Critics argue that it creates uncertainty, while supporters

say it leads to a more fair outcome. Another advantage of conducting proceedings in

Israel is the professionalism of the judges across various legal disciplines – including the

establishment of the Economic Division, which will be discussed below.

The Schematic Structure of Court Proceedings

Legal proceedings begin in the Magistrates or District Courts, depending on the level

of monetary claim, with the latter hearing claims of more than NIS 2.5 million (~US

$713,000). Usually, after the filing of pleadings, the parties may conduct preliminary

proceedings – including discovery of documents – after which the court orders

the filing of the evidence-in-chief in writing. Then, proceedings are set for crossexamination

before a judge, who, in the absence of a jury system in Israel, decides

on questions of law and fact. Following the summation stage, the court gives its

judgment. A final judgment handed down by a Magistrates Court or District Court is

appealable to a higher court (the District Court and the Supreme Court, respectively).

Restrictions of the Right to Approach the Courts

Israeli law considers the right of access to the courts to be a basic or constitutional

right, with restrictions considered rare. Notwithstanding proposals to amend the

/43/

existing law, the plaintiff is not required to approach the defendant before filing the

claim, and there is no obligation to hold preliminary discussions or for mediation

between the parties.

The Economic Affairs Division

In 2011, an Economic Division was established in the Tel Aviv District Court, the

country's largest District Court. The purpose was to consolidate hearings regarding

economic affairs before judges with expertise in this field. The legislator sought

to reduce the time needed for conducting such claims, reflecting the need for

quick decisions in the business world. The Economic Affairs Division has eased the

judiciary's workload and sped up the litigation process in "Economic Affairs," which

includes claims based on the Securities Law, derivative claims and claims pertaining to

the rights and obligations of shareholders of a company.

Derivative Claims and Corporate Class Actions

The Class Actions Law (2006) and the Companies Law (1999) enable the filing of a

class action or a derivative claim on behalf of a class that has suffered damage or on

behalf of a company.

In both cases, the party initiating the proceedings may not file the suit directly, but is

required to get court approval to file it. In such cases, there is a preliminary process

of a motion for certification of a class action or a derivative claim. In spite of some

suggestions to amend the law, no court fee is required for these proceedings, and

their popularity is growing. These proceedings are mostly conducted in the District

Courts (particularly in the Tel Aviv District – in the Economic Affairs Division).

A derivative claim is filed to protect the interests of the company. The request to file

can be made by a shareholder of the company and sometimes also by a creditor of

the company.

Class actions in the corporate field are filed by holders of securities (shares or bonds)

on behalf of a class of securities holders.

Unlike the normal rule, which allows leave to appeal only through a higher court, in the

event of a derivative claim or a class action being approved/certified, the respondent

can request a further hearing before an expanded bench of the District Court.

Trends in Corporate Litigation

The openness shown by the courts towards class and derivative claims has resulted in

an increasing number of such motions being filed. The "natural candidates" for motions

of this kind have always been transactions with controlling shareholders. Gradually,

motions have expanded to include cases of dividend distributions, delisting from

the stock exchange, challenging companies’ compensation policies and challenging

detrimental business decisions. Recent developments suggest that an increasing

number of cases are being brought in which the petitioner argues that the corporate

governance of a company was injured and asks for compensation for the company,

even if it suffered no actual damage. The district courts still struggle with such cases

and decisions in different directions can be found.

One notable trait of the Israeli courts is a striking preference for substance over

procedure. This stance is reflected, for example, in the preference for clarifying

claims on their merits and not dismissing them on procedural arguments.

/44/

Alongside the increasing scopes of claims in the economic sphere, changes have also

taken place regarding the causes of defense. After being unanimously adopted in the

district courts, the Supreme Court finally acknowledged and accepted the Business

Judgement Rule as a binding legal standard in Israel. Adopted from the State of

Delaware, and subject to some local modifications, this rule provides that a decision

taken by the officers of a company will be exempt from judicial review unless the

plaintiff can show that the decision was "uniformed" (i.e., the officers did not gather

enough information before taking it), that the officers acted in bad faith or they had

personal interest in the decision. This means that even if – in retrospect – it appears

the decision was incorrect; the court will not impose personal liability on the relevant

officers. A newer decision by the Economic Division in the Tel Aviv District Court

acknowledges that officers of a company will be deemed to have met the "informed"

criteria of the Business Judgement Rule even if it was later found that the information

they had relied on was erroneous.

A notable decision by the Supreme Court in the past year dealt with what was publicly

known as the "Gas Layout" – the government approval of the sale of the recently

discovered natural gas in Israel's economic waters by private entrepreneurs. Although

approving the Gas Layout, the Supreme Court decided that the government cannot

tie its own hands by promising entrepreneurs it will not change the regulatory

surroundings of gas production.

Class Actions in the Area of Consumer Protection and Antitrust

Issues

The Class Action Law (2006) allows the filing of a class action not only in the corporate

field, but also in other fields. The consumer protection and antitrust fields have seen a

particular rise in class actions. The vast majority of the approximately 1,500 motions

for approval of class actions filed in 2016 dealt with relations between a service

provider and consumer. While not all claims concerned large amounts, there have been

motions filed for hundreds of millions of shekels.

Increasing number of actions against foreign entities can be found – especially in

the antitrust and competition area, where a trend has developed of "importing"

proceedings to Israel following previous proceedings conducted against international

conglomerates in Europe or the U.S. According to a new Supreme Court ruling, for

a plaintiff in an antitrust case to be granted leave to serve a defendant with court

filings outside of Israel, the plaintiff must show that the defendant committed a

wrongdoing in Israel. That the defendant's actions overseas gave rise to damage

caused in Israel is not enough. This ruling is likely to make antitrust cases against

pure foreign defendants a little more difficult for plaintiffs.

The Israeli courts struggle to find a balanced path between adequately protecting

consumers and stockholders and, at the same time, allowing existing as well as new

businesses to flourish. Given the promised rewards to the initiators of a successful

proceeding, there is no wonder that the tendency to bring class actions and derivative

suits is on the rise. In our view, the amount of such proceedings has become a burden

in doing business in Israel – regardless of the outcome in any specific case.

The Israeli courts struggle to find a balanced path between adequately

protecting consumers and stockholders and, at the same time, allowing existing

as well as new businesses to flourish.

/45/

Ever since it was founded, our firm's top priority has been providing the most professional and best quality service

for our clients. Our extraordinary success shows there is no substitute for professionalism, creativity, dedication and

determination.

The firm comprises several departments excelling in a wide range of areas including commercial litigation; class actions;

capital markets and securities; energy issues; antitrust; planning and construction; banking and finance; administrative

law; environmental protection and more.

Litigation is embedded in the DNA of the firm. A number of our Litigation partners have become judges at all levels of

the Israeli court system. Clients benefit from our extensive knowledge of and experience before the courts, regulatory

agencies and tribunals in complex commercial disputes, civil and regulatory actions and antitrust criminal cases. We

also handle the majority of derivative lawsuits in Israel, another specialty of the firm.

This depth of experience in different types of commercial litigation is complemented by our firm-wide commitment and

expertise in the energy, banking, insurance, pharmaceuticals, telecommunications and retail sectors. It is this combined

experience and commitment that attracts many of Israel’s leading enterprises and notable foreign corporations to our

firm when they are involved in high-stakes litigation.

The department thrives under the leadership and reputation of the firm’s founder, Ziv Agmon. With over 30 years'

experience in a diverse range of the most complex and high profile commercial, class action and antitrust litigation, he

is a lynchpin of the team and a major force in Israel.

Uri Sorek is vastly experienced in a broad range of civil and commercial litigation cases, with a strong focus on derivative

actions, class actions, general commercial litigation and antitrust issues. He has a particularly successful track record

in derivative actions, an emerging area of law in Israel. Uri represents a range of public companies and their subsidiaries

across many sectors including the banking, insurance, communications and energy sectors.

Tal Mayshar has an impressive track record in commercial litigation, class actions and derivative actions, antitrust

litigation and administrative law litigation. Her wealth of regulatory experience and extensive network of contacts

ensure she is a go-to person for clients in legislative proceedings and when dealing with authorities, such as government

agencies, the State Comptroller, the Bank of Israel and many more. Her extensive client roster spans the credit card,

banking, energy, industrial and transport sectors.

Agmon & Co.

Rosenberg Hacohen

& Co.

Uri Sorek, Partner

Tal Mayshar, Partner

CONTACT

INFORMATION:

www.agmon-law.co.il

office: + 972 3 607 8607

[email protected]

[email protected]

/46/

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/47/

Mergers and

Acquisitions

ERDINAST, BEN NATHAN,

TOLEDANO & CO.

Roy Caner

Lior Oren

/48/

Mergers & Acquisitions –

Israeli Market Trends and

Insights

The year 2017 was especially fruitful for the Israeli mergers and acquisitions (M&A)

market. Numerous major transactions took place during the first three quarters,

including several large-scale acquisitions of local companies by top tier global players.

During the first quarter alone, approximately 20 M&A transactions, totaling US$15.3

billion, were conducted. While U.S.-based companies still constitute the majority of

investors, Chinese interest is constantly increasing. It seems a solid foundation has

been laid for continued growth of Chinese investments in the local market.

At the same time, Israeli investors have increased their acquisition activity in the

global markets. During the first quarter of 2017 alone, Israeli investors conducted

approximately 15 transactions in the U.S. market at a total value of US$1.9 billion

– similar to the acquisition scope by Israeli companies during the whole of 2016.

Examples include the Delek Group’s US$1.1 billion acquisition of Ithaca Energy,

Cyber Arc's acquisition of Conjur and numerous acquisitions by Frutarom.

In addition, after several years of decline in the IPO market, IPO activity experienced

a notable increase in 2017. There were 14 IPOs during Q1-Q3, raising NIS2.7 billion

(US$ 763.4 million) (compared with a total of 14 IPOs launched from 2012 to 2016)

with five additional IPOs expected to launch during the next few months.

Over the course of the past 12 months, we have seen several of the largest

acquisition transactions ever made in the Israeli market, both in the tech and

industrial arenas. In March 2017, Intel announced the purchase of automotive

leader Mobileye for US$14.7 billion, constituting the largest tech exit in the

Israeli market. Shortly thereafter, biomed company NeuroDerm was acquired by

Japanese pharmaceuticals company Mitsubishi Tanabe Pharma Corporation for

US$1.1 billion. In August 2017, Netafim, a leading player in the global market of

drip irrigation products (represented by our firm) was acquired by Mexichem at a

company valuation of US$1.9 billion.

Increased Chinese Interest

During the past year, the interest of Chinese investors, especially in the everdeveloping

Israeli technology market, has increased substantially. Large-scale

Chinese investors in search of cutting edge tech-driven entrepreneurships,

specifically in artificial intelligence and life science, continue to explore the local

market. Indeed, several tech ventures were recently acquired or became the subject

of massive equity investments by Chinese players. Chinese investors have also

/49/

demonstrated interest in more traditional markets, actively participating in the

acquisition tender procedures undertaken in connection with the contemplated sale

of Netafim and Clal Insurance, one of the largest insurance providers in Israel.

We anticipate that interest from China will intensify in coming years due to the

following recent developments:

The formation of the China Israel Technology Fund, which has investment capital

of US$440 million to invest in Israeli technologies operating in the fields of internal

security, robotics, automotive and cyber. Two similar funds are scheduled to be

established during 2018.

The recent announcement of several China-Israel innovation centers. These include

the launch of an R&D center by the Chinese Hangzhou Wahaha Group in Haifa in

cooperation with Haifa University and the opening of unique innovation hubs by

Haier, IcarbonX and Alibaba, which are expected to eventually translate into future

increased deal flow.

After years of strict restrictions on investments outside of China, new regulations

were recently adopted by the Chinese government enabling Chinese investments

abroad in selected technology sectors, thereby facilitating equity investments

and reducing the level of uncertainty that was viewed to be associated with such

investments.

Disposal of Kibbutz-Based Industries

Another trend that has gained momentum over the past year is the increase in sales

of kibbutz-based industries, in amounts representing impressive returns. As a result

of such transactions and the introduction of global financial and strategic players to

the market, kibbutz industries continue to grow to global dimensions and effect a

major business leap that may not have been achieved without the involvement of a

globally reputable acquirer.

To avoid extensive regulation and public disclosure obligations, the kibbutz

companies often prefer to sell ownership to private investors rather than by way

of IPOs. Recent examples include the acquisition of Galam by FIMI from Kibbutz

Ma'anit and Bereshit Fund for NIS290 million (~US$82 million), Mexichem’s

acquisition of Netafim from Kibbutz Hatzerim and Permira, the sale of the remaining

49% stake in the infant-formula maker Materna (owned by Kibbutz Maabarot) to

its partner Osem-Nestle for NIS575 million (~US$163 million) and the acquisition

of Hanita Coatings from Kibbutz Hanita and Tene Investment Funds by Avery

Dennison Corporation for US$75 million.

As part of such transactions, the kibbutz often remains as a minority shareholder.

In addition, many of these deals are characterized by the kibbutz's insistence that

the acquirer undertakes to maintain future production in the local kibbutz-based

manufacturing facility for a lengthy period. During this time, the kibbutz continues

to render various services to the company, as well as assume certain restrictions on

layoffs of kibbutz members.

Regulation Driven Transactions

A continued trend reinforced in 2017 is M&A transactions triggered and motivated

directly by recent laws enacted by the Israeli parliament. This includes the Law for the

Promotion of Competition and Reduction of Concentration (2013). This law mandates

/50/

separation of ownership between industrial/retail corporations and financial services

institutions, requiring certain shareholders having cross ownerships to dispose

of their holdings in one of the two entities by no later than December 2019. As

a result, the efforts to dispose of certain insurance companies and fund managers

have intensified during the past year. Examples include the sale by Delek Group of the

controlling stake in Phoenix to the Sirius Group (represented by our firm), as well as

the ongoing sale process by IDB in respect of the controlling stake in Clal Insurance.

A more recent development that has already instigated PE awareness and interest

is the Law for Increasing the Competition and Reducing the Concentration in the

Banking Market (2016), which contemplates separation between banks and credit

card operators, therefore requiring Israeli banks to sell substantial holdings in credit

card companies by January 2020. We anticipate the sales processes associated

with the relevant targets affected by such legislations will intensify as we approach

the statutory compliance deadlines.

Continued Growth in the Tech Market

The Israeli high-tech market has also experienced a prosperous year with US$1.44

billion raised in the third quarter of 2017 – a 54% increase over the same period in

2016 – and a total of US$3.8 billion raised since the beginning of 2017. As Israel has

become a destination for major players in the global automotive industry seeking

unique software, sensors and technologies, two high-tech sectors that gained

specific global attention are the automotive and artificial intelligence fields.

Examples include the establishment of GM’s R&D center for autonomous vehicles in

Israel, Intel’s acquisition of Mobileye and the acquisition of Argus Cyber Security, the

global leader in automotive cyber security, by the German Continental, in which our

firm was involved, for US$430 million. At the same time, there has been substantial

growth in the field of artificial intelligence with over 200 Israeli start-ups operating

in this sector. These AI companies are enjoying heightened Chinese interest due to

the country’s state council encouraging Chinese companies to develop and invest

in AI technologies.

Summary

As demonstrated above, most of the local M&A activity is cross-border, which

requires ongoing professional collaboration among local and international law

firms, as well as global investment advisors and accounting professionals. Such

transactions require cutting-edge expertise in domestic legal aspects (especially

in a highly regulated environment such as Israel) and close cooperation with foreign

firms whose contribution to the success of the transaction is crucial, particularly

once the transaction is coupled with acquisition financing which often requires the

creation and perfection of liens in numerous jurisdictions.

We expect the trends mentioned above to continue into 2018, and hope to

experience continued increase in inbound investments in the industrial, financial

and tech sectors. It is also anticipated that global tech companies will become

increasingly involved in Israeli ventures due to the expected establishment of

additional technology innovation and development centers by global companies such

as Alibaba, Booking.com, NVIDA, Haier and others, coupled with increasing Chinese

investments, particularly in the automotive, artificial intelligence and life science

sectors. Finally, with the regulatory compliance deadlines rapidly approaching, certain

targets directly affected by the above mentioned legislation are likely to experience

increased interest, particularly in the credit card and financial services markets.

/51/

Erdinast, Ben Nathan, Toledano & Co. is one of Israel's leading and fastest growing commercial law firms, with over

100 lawyers. The firm is widely recognized for its broad experience and expertise in leading complex cross-border

M&A transactions and representing private equity and venture capital investment funds. EBN was recently recognized

as the 2017 Israel M&A Legal Advisor of the Year by Mergermarket and as Israel Law Firm of the Year by the IFLR

European Awards, announced in April 2017. The firm is also consistently ranked as a leading commercial law firm by

Chambers Global, Legal 500, IFLR1000 and Israeli ranking guides.

EBN’s M&A department is one of the largest and most sophisticated and experienced M&A practice groups in Israel.

It has played a central role in many significant transactions and is handling some of the leading transactions of 2017.

The group has continuously acted for a huge volume of some of the leading clients in Israel, and has built a unique track

record of being involved in prominent exit transactions. The group has been engaged in some of the most complex

matters in Israel over the past 12 months.

EBN is recognized for its international expertise, stemming from a diverse international clientele, as well as the training

and experience of its lawyers at leading U.S. law firms. The strength of the M&A department continues to grow. This

past year was among the most successful in terms of corporate and M&A transactions, as evidenced by Mergermarket

naming EBN as Israel’s M&A Legal Advisor of the Year.

Roy Caner is a senior partner in the M&A department and head of the High-Tech group. Roy specializes in international

and domestic M&A, private equity and venture capital investments, representation of high-tech companies at all

stages, commercial and corporate law, securities and capital markets, with a focus on cross-border M&A and techrelated

investment transactions. Roy is a member of the NYSBA and practiced for four years at Davis Polk & Wardwell

in New York.

Lior Oren focuses his practice on private and public M&A transactions, both local and international, private equity

and venture capital investments, tech-driven ventures, debt and equity financing, securities, regulation, antitrust and

commercial matters, with an expertise in advising acquirers of heavily-regulated targets. Lior is a member of the NYSBA

and practiced at the M&A practice group of Anderson Kill, P.C. in New York for over four years.

Erdinast, Ben Nathan,

Toledano & Co.

Roy Caner, Senior M&A Partner and Head

of High-Tech

Lior Oren, Senior M&A and High-Tech Partner

CONTACT

INFORMATION:

www.ebnlaw.co.il

office: +972 3 777 0111

[email protected]

[email protected]

/52/

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Edward Costelloe

([email protected])

/53/

Real

Estate

YIGAL ARNON & Co.

Lee Maor

/54/

Conducting Real Estate

Transactions in Israel is

Now Easier Than Ever

The World Bank’s annual Doing Business report examines the ease of conducting

business in 190 economies around the world. The report provides comparative

ranking of the processes of doing business in several different areas.

One area examined and ranked in the report is "Registering property." In the 2010

report, Israel ranked relatively low. In recent years, the Israeli authorities have

introduced various new processes and methods to simplify, speed up and streamline

the process of registering real estate. Thanks to these efforts, Israel has moved up

21 places in the 2017 ranking.

In Israel, real estate rights are registered with the Land Registrar. To transfer property

rights from the seller's name to that of the buyer, the parties must sign a deed of

transfer, submit tax certificates issued by the Israel Tax Authority (ITA) and provide

clearance from the municipal authorities confirming there are no outstanding debts

on the property.

If any of the parties is a registered company, it must also submit a copy of its

Certificate of Association, certified by the Companies Registrar, and corporate

resolutions authorizing the transaction.

This list of requirements, which involve various authorities and processes, have in

previous years made the registration of rights in real estate in Israel a long and arduous

process. To facilitate a simpler and easier process, several regulatory changes have

been introduced, as described below.

Tax Certificates – The Land Tax Authority

According to Israeli law, the responsibility for reporting real estate transactions

and their tax results is incumbent upon the parties with the tax authorities having

eight months to audit the report. Often, the Land Tax Authority did not approve the

parties’ self-assessments and instead assessed a higher tax duty.

To fight such a decision, the parties had to conduct long appeal processes with the

tax authorities. Only once this process was completed and the full tax levied paid,

Israel may be the "Start-up Nation" and a world-renowned center of

technological innovation, but until recently, government bureaucracy was

lagging.

/55/

could the parties get the tax certificates they needed to register the transaction in

the Land Registry.

Following the conclusions of a committee chaired by the Director General of the

Treasury, some important amendments to the Land Tax Law were introduced in 2010,

including a new mechanism for obtaining the tax certificates required for registration

of rights.

To date, subject to certain circumstances that are generally satisfied in most cases,

tax certificates are obtained even before the full consideration has been paid and

before the transaction has been completed. This has removed a major delay for

registration of many transactions.

Israel may be the "Start-up Nation" and a world-renowned center of technological

innovation, but until recently, government bureaucracy was lagging. Having

understood the need to ease the performance of real estate transactions and

to make the interface with the Land Tax Authority as smooth as possible, the

government recently introduced an online land-tax reporting system that expedites

the processing of self-assessments.

Certificate of Association from the Companies Registrar

As mentioned above, where one or more of the parties is a company, the party must

submit a certificate of association certified by the Companies Registrar as a true copy.

Until recently, to get a true copy, the company had to apply and retrieve the files

from the central archive of the Companies Registrar. Only once the physical copy

was at the office of the Companies Registrar could the company copy the certificate

of association and, against further payment, obtain a "true copy" stamp from the

Companies Registrar.

Now, company files can be downloaded online and printed with a Companies Registrar

electronic "true copy" stamp, which saves time and money for all involved.

Clearance Certificate from the Local Authority

To receive confirmation from the local authority that there are no outstanding debts

on the property, the parties must first send the local authority an application form,

a copy of the sale agreement, a copy of the buyer’s ID and documents certifying the

date in which possession is delivered to the buyer.

In the past year, large local authorities, such as Tel Aviv, have introduced a new

system enabling parties to submit all these documents by email. Hopefully, other

local authorities will follow in their footsteps and allow for faster processing of real

estate rights transfers.

The Land Registrar

Once the parties have obtained all the documents required to register the transfer

rights, they must submit them to the Land Registrar. Until recently, many applications

were rejected because of formalities that the parties had to correct and resubmit.

In the past few years, the Land Registrar has undergone a sweeping reform whose

purpose is to make registration fast and more efficient.

For example, many new procedures relaxing the strict requirements previously in place

have been published over the last two years. Registration procedures are published

/56/

regularly on the website of the Land Registry and Settlement of Rights Department.

The Department staff reviews all transfer documents submitted and does its best to

return all comments in a single reply. Concurrently, the number of people working at

the Land Registration Bureaus has been increased, which has shortened processing

time.

Recently, an online registration system was launched that allows for online transfer

of rights in certain properties. While this is still in pilot stage, it indicates the future

aim of being an online system connecting between the Land Registration Bureau, the

local authority and the Land Tax Authority – sparing the parties the need to apply for

individual clearances.

The results speak for themselves. According to the Land Registrar’s data, the

Nationwide average registration time has been reduced from 45 to 13 days. In most

cases, registration takes only a few days.

In 2010 Israel defined a clear aim: To simplify, expedite and streamline the process of

registering real estate rights. Various actions that the government has implemented

have since changed the situation in this field for the better.

The Justice Ministry is working on more improvements to the service, including

direct interfaces between the Land Registrar’s computers and those of the other

government agencies that generate documents or certificates that are required by

the Land Registrar.

A direct connection between the Land Registrar, the Tax Authority and the local

authorities would obviate the need for submission of physical certificates. The

interface is planned so that the Land Registrar’s online system, which will be

connected to those of the Tax Authority and local authorities, will automatically

identify whether the necessary tax and municipal duties have been paid, allowing for

a transfer of rights.

A direct interface between the Land Registrar and the banks, which is currently under

the initial stages of implementation, will enable removal of paid-up mortgages without

the parties having to proactively apply to the bank or the Land Registrar to do so.

Until recently, original documents were considered a critical condition for registration

of rights in real estate, which naturally resulted in massive amounts of printed

materials. The technological improvements described above reflect nothing short of

a revolution in this field. Pretty soon, almost all transactions that require registration

will be accomplished through a handful of simple online commands. This revolution

will possibly not only shorten the process of registering rights in real estate, but it

will also simplify and shorten negotiations in real estate transactions, thus facilitating

and expediting the doing of business in Israel and saving a lot of money for all sides

and the economy as a whole.

Israel is not resting on its laurels and we expect further changes that will make

registration of real estate rights – and doing business – much easier.

Pretty soon, almost all transactions that require registration will be

accomplished through a handful of simple online commands.

/57/

Yigal Arnon

& Co.

Lee Maor, Partner

CONTACT

INFORMATION:

www.arnon.co.il

Tel Aviv office: +972 3 608 7777; Jerusalem office: +972 2 623 9200

[email protected]

Yigal Arnon & Co. boasts one of the largest, most professional, experienced and reputable real estate practices

in Israel, with over 40 lawyers operating in our firm’s offices in Tel Aviv and Jerusalem. The firm has unique and

unparalleled expertise gained from 60 years of involvement in Israel's most significant real estate projects, including

commercial, residential, industrial, infrastructure, office, shopping center, hotel, resort, residential and mixed-use real

estate projects. We represent all classes of parties in real estate projects, including companies, contractors, sellers

and buyers, financial institutions, tenants and owners. Our clients include major Israeli and international real estate

companies, investment companies, construction companies, holding companies, domestic and international banks,

real estate developers and individual entrepreneurs.

The firm engages in a wide range of real estate matters, from huge multi-use projects to transactions involving single

apartments, and is able to provide all of the required services to meet its clients' needs. These include: sale purchase

agreements, partnership agreements, management agreements, financing arrangements, planning procedures, due

diligence/property searches, tax planning, tax procedures, urban renewal projects, real estate litigation, bond issuances

and public offerings relating to real estate projects and companies. We provide a wide range of services in planning

and construction. We assist our clients, including some of Israel’s leading real estate development companies, at

each stage of the planning and construction process, from property re-zoning and conversion, planning committees,

through building plan approvals, building permits and completion certificates. The firm's Real Estate practice is ranked

by international and Israeli guides as a Tier 1 firm, and as an elite practice.

Lee Maor, Partner at Yigal Arnon & Co. law firm, represents clients in a broad range of issues involving real estate

transactions, land registration, construction and management agreements and ongoing legal advice to real estate

companies.

Lee joined Yigal Arnon & Co. in 2010 and became a partner in 2016. Since then, she has assisted contractors with various

development projects for the construction of roughly 765 residential units that were sold for more than NIS 1.2 billion (~

US$340 million). In addition, she has closed on residential and commercial deals worth millions –among them, the fourth

most expensive deal in Israel in 2011, according to The Marker – facilitated property financing, negotiated complex loan

agreements in front of numerous banks, taken active roles in significant urban renewal deals and also provided legal advice

regarding the sale and purchase of building rights promulgated under the Tel Aviv`s preservation plan.

Lee is a leading individual in her field. She is involved in many challenging and precedential transactions, and is respected for

her innovative and multidisciplinary approach to all aspects of legal representation, including her familiarity with tax issues

that often coincide with real estate transactions. Lee received her LLB, at the Hebrew University in Jerusalem in 2006 and

was admitted to the Israel Bar in 2007.

/58/

/59/

Tax

GORNITZKY & Co.

Daniel Paserman

Danielle Skald

/60/

Israeli Tax

Trends

In recent years, international competition for investments has substantially increased,

inter alia, in light of the global crisis and worldwide slowdown. As a result, Israeli policy

makers realized the implementation of new tax incentive policies was required to

promote and develop competitive advantages and attract investments into Israel.

Israel – the "Start-up Nation" – chose to encourage investments and operations in

the field of technology. Accordingly, two significant changes were made:

Tax-Free Reorganizations

The Israeli Tax Ordinance (ITO) sets terms and conditions for tax-free reorganizations,

provided the economic identity of the shareholders is mostly preserved and no

realization has occurred during a period of two years (Restriction Period). The

limitations that were in force for almost two decades made it difficult for companies,

especially in the high-tech sector, to expand their business and raise capital. Effective

August 6, 2017, a major amendment of the ITO was made to increase the availability

of tax-free restructurings by minimizing the aforesaid conditions and limitations.

The main changes include: (i) the original shareholders may sell or dilute their shares

providing they remain the holders of at least 25% of the merged company during the

Restriction Period (rather than 51%); (ii) up to 40% of the consideration received in

a tax-free reorganization may be in cash (rather than only in the form of shares); (iii)

in a share-for-share merger, the receiving company will be required to hold only 51%

(rather than 100%) in the transferred company during the Restriction Period; (iv)

relief in the requirement to apply for a pre-ruling application in certain cases.

Encouragement of Capital Investments Law

The Encouragement of Capital Investments Law is intended to encourage capital

investments and economic initiatives of enterprises that meet certain requirements,

mainly by providing reduced corporate tax rates.

To encourage foreign investments, make Israel more attractive to international

high-tech companies and increase the development and registration of intellectual

To encourage foreign investments, make Israel more attractive to international

high-tech companies and increase the development and registration of

intellectual property in the country, effective as of January 1, 2017, a new

incentive regime was implemented.

/61/

property in the country, effective as of January 1, 2017, a new incentive regime was

implemented.

The new incentive regime (New Regime) provides tax benefits for two types of

enterprises: (a) "Preferred Technology Enterprises" (PTE) and (b) "Special Preferred

Technological Enterprises" (SPTE). The New Regime includes, inter alia, the following:

(i) a reduced corporate tax rate of 12% on income that qualifies as "Preferred

Technology Income" for PTE or 7.5% if the PTE is located in Development Region "A,"

and a 6% corporate tax rate for SPTE, regardless its geographic location; (ii) PTE and

SPTE, subject to certain conditions, will benefit from a reduced corporate tax rate of

12% and 6% respectively on capital gains derived from the sale of certain "Benefitted

Intangible Assets" to a related foreign company, and (iii) dividends distributed by a

PTE or SPTE, paid out of Preferred Technology Income, will be subject to withholding

tax of 20% or 4% if distributed to a foreign parent company that holds 90% or more

of the shares of the PTE or SPTE.

As noted, the Israeli tax legislator is trying to promote legislation that will encourage

foreign investment and the development of economic activity in Israel, especially in

the field of technology. At the same time, the policy makers and the enforcement

authorities are aggressively closing various loopholes in the law and applying a strict

enforcement policy. These include the following:

Enhanced Scrutiny on Cross-Border Related Parties’ Transactions

(1) Change of Business Model

Israeli start-ups and technology companies have attracted many foreign investors

over the years. Following an acquisition of an Israeli start-up, multinationals usually

restructure the business model of the acquired company by selling or licensing its

intangible assets to a related party abroad, and the Israeli company becomes an R&D

center.

In recent years, these transactions have been scrutinized by the ITA, with our firm

representing some of the companies involved. When the transaction is a license

agreement – the ITA examines whether it is actually a sale of assets. When the

transaction is a sale of the company’s IP – the ITA examines whether the sale was

done at fair market value.

In 2017, two major cases – the "Gteko" and "Mercury" – cases reached the Israeli

headlines. In both cases, the ITA’s claim that the IP was sold for a price significantly

under the fair market value prevailed.

The aforesaid might significantly affect the structure and pricing of mergers and

acquisition transactions of technology companies.

(2) Preventing Deferral of Taxation by Shareholders in Closely Held Companies

To prevent the creation of a tax advantage for individual shareholders holding 10%

The Israeli tax legislator is trying to promote legislation that will encourage

foreign investment and the development of economic activity in Israel,

especially in the field of technology. At the same time, the policy makers and

the enforcement authorities are aggressively closing various loopholes in the

law and applying a strict enforcement policy.

/62/

or more of the shares (Substantial Shareholder) in closely held companies, several

amendments of the ITO came into force as of January 1, 2017, including (i) the

withdrawal of funds from a company by a Substantial Shareholder by way of a loan,

provision of a guarantee for a loan or provision of an asset for the use and benefit

of the Substantial Shareholder that shall be deemed, upon the existence of certain

conditions, as a distribution of dividend or business income if there are no sufficient

profits for distribution; (ii) the ITA is authorized under certain conditions to view a

closely held company as if 50% of its profits for the year have been distributed as a

dividend; (iii) in a company in which income is derived from services provided by its

Substantial Shareholder, the profits of the company might be directly attributed to

that individual and thus subject to marginal tax rates (of up to 50%).

Broad interpretation and application of the legislation might have broad tax

implications on the operation of foreign corporations in Israel, including implications

on M&A transactions and their financing.

Exchange of Information & Increased Reporting

(1) Exchange of Information

To act upon OECD recommendations, Israeli policymakers have lately made a great

effort to align with other countries with respect to exchange of information, including:

(i) provision of authority to ITA to exchange information with foreign tax authorities, on

its own initiative or pursuant to the request of a foreign country; (ii) changes enabling

the ITA to comply with FATCA and CRS according to which the ITA shall be authorized

to collect information held by Israeli banks and other Israeli financial institutions; (iii)

adopting the recommendation of the BEPS – Action 13 with respect to "Transfer Pricing

Documentation and Country-by-Country Reporting" into Israeli domestic tax law.

(2) Increased Reporting

The law imposes various reporting obligations in connection with tax planning and

reliance on legal opinions by taxpayers. The ITA has published a series of tax positions

that the taxpayer must report in his or her annual tax report.

In light of the above, it appears the legislation amendments may, in fact, make Israel

more appealing. At the same time, increased transparency and full disclosure will result.

In 2017, two major cases – the "Gteko" and "Mercury" – cases reached the

Israeli headlines. In both cases, the ITA’s claim that the IP was sold for a price

significantly under the fair market value prevailed.

/63/

Daniel Paserman, Partner, Head of Tax

Danielle Skald, Associate

Gornitzky & Co.

Gornitzky & Co. is one of Israel's most established commercial law firms, with a rich history spanning nearly 80 years.

It is consistently recognized by international legal guides as a top-tier law firm across many practice areas. Over the

years, Gornitzky & Co. has been involved in many of the largest, most complex and high-profile transactions to take

place in Israel and has played a key role in the development of Israel's economic and commercial legal practice.

Gornitzky provides a full range of legal services including M&A, private equity and venture investments, technology,

high-tech, taxation, banking and finance, infrastructure and project finance, energy, international and domestic capital

markets, dispute resolution, restructuring and insolvency, real estate, regulatory matters and representation before

government bodies. The firm has a global and local client base that includes Israel's largest businesses and corporate

groups alongside foreign and multinational corporations and financial institutions.

For years, Gornitzky's Tax practice has been at the forefront of the Israeli tax arena and has been involved in many of

the most complex tax cases in the country. The tax team advises on the most demanding, high-profile and high-value

tax matters in the country, including domestic and global corporate tax, reorganizations and cross-border structuring,

capital markets and financial products, taxation of high net worth individuals and trusts, transfer pricing, indirect tax,

real estate tax and tax controversy and tax litigation, including white collar offenses. Many of these matters have set

important precedents and have influenced Israeli tax laws in the making. In addition, the team is particularly wellknown

for its creative thinking and innovative domestic and international tax planning, including, in particular in multijurisdictional

matters.

Daniel Paserman (CPA) heads Gornitzky's Tax practice. Daniel is involved in intricate corporate tax planning – both

domestic and cross-border. His broad experience includes negotiations with the Israel Tax Authority (ITA) regarding

tax regulatory issues, seeking and obtaining tax rulings for both Israeli and global companies operating in Israel, as well

as handling wide-scope tax assessment cases and tax litigation for both global and Israeli corporations and private

entities operating in Israel.

Daniel also advises private clients in matters concerning taxation of trusts and estates and provides tax planning

guidance for high net worth individuals. He serves as the secretary of Society of Trust and Estate Practitioners Israel

(STEP). He is also a lecturer on Corporate & International Taxation at Tel Aviv University.

Danielle Skald is an associate at Gornitzky. She advises clients on a range of taxation matters, extending from corporate

tax and international taxation to domestic and cross-border restructurings, executive compensation and VAT.

CONTACT

INFORMATION:

www.gornitzky.com

office: +972 3 710 9191

[email protected]

[email protected]

/64/

/65/

Trusts and

Estates

ALON KAPLAN ADVOCATE

& NOTARY

Dr. Alon Kaplan

Meytal Liberman

/66/

Trusts and Estate

Planning In Israel

Israel has long been a "home" for many international families who have found a "sense

of belonging," as well as business opportunities, in the country. It is well known as

the "Start-up Nation", as it attracts large companies such as Intel, Google, Apple and

Facebook. These sentiments and business opportunities make Israel a preferable

investment jurisdiction, mainly in the areas of private equity, high-tech, technology

and real estate.

International families in the modern era of globalization and movement of people

and assets require adequate planning for the holding of assets, investments, crossgenerational

transfer of assets, cross-border succession issues and similar areas.

Trusts under Israeli Law

Trusts remain a legitimate planning option for various international families and crossborder

issues in Israel. Israel’s Trust Law (1979) governs the creation of a trust similar

to common law trusts, which are increasingly popular among non-residents.

The first trust law was legislated in 1923 by the British Mandate (1922-1948) relating

to public charities and was based on the common law trust. Private trusts were

utilized by zionist organizations and Jewish families who immigrated to Israel from

Europe, the United States, Canada and South Africa, as these were jurisdictions in

which individuals and professionals were familiar with the trust regime. Following the

establishment of the State of Israel in 1948, court precedents were established in the

areas of inheritance, gifts and trusts.

The Trust Law featured several innovations that created interesting practical

possibilities: it permitted the creation of trusts without the settlor transferring official

legal title of the assets to the trustee; and it set no limit for the duration of trusts and

it permitted non-charitable purpose trusts.

Israeli practitioners sometimes chose to create trusts for their clients under foreign

trust regimes, with such trusts being recognized in Israel.

Private trusts were utilized by zionist organizations and Jewish families who

immigrated to Israel from Europe, the United States, Canada and South Africa,

as these were jurisdictions in which individuals and professionals were familiar

with the trust regime.

/67/

Trusts governed by the Trust Law may be settled by contract or by deed. Those

settled by contract are governed by an agreement that does not require a formal

written document (although proving the terms of the trust may be difficult where

there is no written agreement). Contractual trusts do not permit generational transfer

of assets upon the settlor’s demise, as they do not satisfy the certain provisions of

the Succession Law.

Trusts created by deed, defined as "hekdesh" under the Trust Law, require a deed signed

before an Israeli notary. The trust is established upon the trustee obtaining control

of the trust assets. The trust, upon settlement and management in accordance with

the legal requirements, removes the assets from the settlor’s estate, and therefore,

probate or inheritance proceedings are not required upon the settlor’s demise.

Testamentary trusts may be settled within an individual’s last will and testament. Such

trusts must be in writing, executed in accordance with the legal formalities required

by the Succession Law, and are valid upon the issuance of a probate court order by

an Israeli court.

A valid last will and testament can be made in one of the following forms: a handwritten

will; a will signed in the presence of witnesses; a will in the presence of an authority,

while the definition of "authority" includes a court judge and a notary. In certain

circumstances, a deathbed will is also recognized as a manner to create a valid last will

and testament.

Under Section 8(b) of the Succession Law, "a gift granted by a donor during the

donor’s lifetime, when such gift is to be effectively provided to the donee subsequent

to the donor’s demise, is null and void, unless such gift was included within a valid will."

Therefore, it is recommended to create an inter-vivos trust and transfer control over

the assets to the trustee during the lifetime of the settlor.

The Use of Real Estate Trust for Investments and Holding of

Property in Israel

Real Estate Trusts (RET) have been used in Israel for many years and for various

purposes, including legitimate tax planning, asset protection and commercial

transactions. RET is a legal structure under which real estate is purchased by a trustee,

or is transferred to a trustee, and the trustee acts as a nominee or "Bare Trustee" for

an identifiable beneficiary. Israeli law, namely the Real Property Taxation Law and the

Trust Law, provide the legal structure for such an RET. These laws allow the registration

of the trustee as the legal owner of the real estate while the beneficiary of the real

estate is considered as the real owner, similar to a beneficiary of a bare trust in the

common law.

Under the Real Property Taxation Law, two main taxes are imposed upon a sale of

real estate: a Capital Gains Tax on the seller, and a Purchase Tax on the purchaser.

The Capital Gains Tax is calculated in accordance with the increase in the value of

A valid last will and testament can be made in one of the following forms: a

handwritten will; a will signed in the presence of witnesses; a will in the presence

of an authority, while the definition of "authority" includes a court judge and a

notary. In certain circumstances, a deathbed will is also recognized as a manner

to create a valid last will and testament.

/68/

the property since its purchase; the time period during which the seller owned the

property and the existence of other real properties owned by the seller. The Purchase

Tax represents a certain percentage of the purchase price. This percentage is set in

accordance with other real properties owned by the purchaser.

The real estate market in Israel is in great demand by both Israeli and foreign investors.

Some investors choose to hold properties they purchase in the name of a trustee. This

structure may be found particularly useful and efficient for non-Israeli families that

decide to invest in real estate in Israel or have a second home in Israel.

Conclusion

Immigration to Israel over the years has brought with it a diverse population from

various countries in the world that requires the special services of trusts, estates and

succession planning. These services require expert advice relating to international

taxation aspects.

Recent developments in the field of Anti-Money Laundering, including exchange of

information, FATCA and CRS, require professionals to pay special attention to details

when providing such services.

The matters discussed in this article present a bird’s eye view of the issues that should

be considered when engaging in trusts, estates and succession planning in Israel.

It is recommended to broaden one’s knowledge more about the subject through

professional literature, such as Trusts in Prime Jurisdictions and Trusts and Estate

Planning in Israel. It is also highly recommended to consult with experts in the field.

In the past 10 years, there has been a positive development in the use of trusts under

Israeli law, by both Israeli residents and foreign residents.

/69/

Alon Kaplan,

Advocate & Notary

Dr. Alon Kaplan, Founder & Managing Partner

Meytal Liberman, Associate Advocate

Established in 1975, Alon Kaplan Advocate & Notary offers services in the fields of commercial law, international trusts

and estates, real estate, tax and international transactions. The firm has extensive activity in Europe in the areas of trusts

and estates, private banking and international transactions.

Alon Kaplan Advocate & Notary advises overseas and Israeli clients on foreign and Israeli trust and cross-border

succession. Trusts are structured to meet the client’s particular needs, including succession planning, asset protection

and forced heirship issues.

The firm advises on all matters of estate planning, trusts, probate and inheritance proceedings. This includes services

relating to probate and inheritance procedures, administration of estates and cross-border inheritance matters.

Alon Kaplan Advocate & Notary also provides legal advice to family offices in matters of structuring and organizing family

businesses, the creation of trusts and estate planning for family-owned businesses.

Another facet of the firm is providing legal and tax advice to overseas companies and individuals wanting to establish a

foreign-owned business in Israel. This includes tax-planning advice involving personal tax law and international tax issues.

To provide these comprehensive services, the firm works closely with lawyers, tax experts and accountants in several

jurisdictions and maintains close relationships with reputable banks in Israel and overseas, as well as with numerous law

firms and trust companies.

Dr. Alon Kaplan is a member of the Israel, New York State and German Bars and also the chairman of the Israel Bar

Association's private international law committee. Alon is a member of the Society of Trusts and Estates Practitioners

(STEP) and President of STEP Israel. He is an Academician at the International Academy of Estate and Trust Law and

a Fellow of the American College of Trust and Estate Counsel. Alon publishes regularly in distinguished professional

publications and speaks at seminars and conferences internationally. He is the general editor of Trusts in Prime

Jurisdictions (4th Edition) and author of Trust and Estate Practice in Israel.

Meytal Liberman is a graduate of Bar-Ilan University (LLB) and of Tel Aviv University (LLM). She was admitted to the

Israel Bar in 2013 and practices law as an Associate Advocate at the firm, where she also completed her legal internship.

Meytal earned her Diploma in International Trust Management in 2015, and has been a member of the STEP since then.

Her main practice areas include trusts and estates, inheritance, and real estate.

CONTACT

INFORMATION:

www.alonkaplan-law.com

office: +972 3 508 4966

[email protected]

[email protected]

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