Israel is a small country with a small economy, surrounded by hostile neighbours and
facing constant geopolitical uncertainties. On the face of it, investing in Israel seems
to be an irrational business decision. Nevertheless, Israel is a prime destination for a
wide range of investors. A strong combination of innovation and entrepreneurial drive
continues to attract to Israel the world’s leading technological companies, venture
funds, private equity funds and, more recently “crowd funding” investors, all of whom
are looking for the idea, the development, the product that is ahead of the field, either
for strategic reasons of simply for a financial return.
Microsoft, Apple, Facebook and Google have all made recent acquisitions in Israel,
highlighting Israel as a focal point of technological development for these global
giants. A number of Israeli companies have completed high profile public listings.
At the same time we are beginning to see more local technology companies making
their own acquisitions within Israel. The fact that Israeli companies are looking to grow
through local acquisitions is an indication that not all high-tech entrepreneurs are
looking for an early “exit”, and reflects a greater maturity in the Israeli high-tech sector.
This trend is boosted in part by the growing ability of the more mature Israeli hi-tech
companies to raise capital both privately and in public markets.
And it is not just in the technological sector. The Chinese State-owned Bright
Food Group in 2015 acquired control of Tnuva, Israel’s largest dairy concern, in a
deal valuing Tnuva at approximately US$2.5 billion. The seller was Apax Partners,
one of the world’s largest investment funds, which continues to look for investment
opportunities in Israel. This deal and others are indicative of the growing wave of
interest from China in the Israeli marketplace. Since the acquisition in 2011 by China
National Chemical Corporation (ChemChina) of Makhteshim Agan Industries, the
world’s largest generic agrochemical producer (now rebranded as “Adama”), there
has been a remarkable increase in Chinese investment in Israeli technology and
Israel is a technological powerhouse. The Israeli business milieu is
cosmopolitan, business professionals are highly qualified, the courts are
well-regarded and impartial. The Israeli workforce is educated and skilled. So,
despite the apparent disadvantages, Israel continues to attract substantial
Some of the world’s largest private equity funds are looking
closely at Israel for opportunities. As a general rule, these funds
are looking for more mature companies, with proven revenue
history and especially with export sales. There are numerous
such opportunities in Israel of companies still controlled by the
founding shareholders or by the second generation, or owned
A major “driver” for M&A activity in traditional areas of the economy is a recent law
introduced in order to promote competition in the over-concentrated Israeli economy.
At the end of an initial transition period, it will no longer be permitted for a single
investment group to own both a substantial financial enterprise and a substantial nonfinancial
enterprise. As a result, a number of major financial enterprises (banks and
insurance companies) and industrial concerns will inevitably be sold off in the coming
years. In addition, a number of major conglomerates in Israel have borrowed too
heavily, and have been forced to sell off major assets in order to finance indebtedness.
Israel’s new Finance Minister, Moshe Kahlon, faces three major economic challenges.
The first of these is to introduce competition into Israel’s banking sector. The
banking sector is totally dominated by Israel’s two largest banks, Bank Leumi and
Bank Hapoalim. The new Minister has entered office vowing to open up Israel’s highly
concentrated credit market to competition. The first move appears to be a demand
that Israel’s major banks dispose of their credit card operations.
The second challenge is the ongoing saga of Israel’s offshore gas monopoly. The two
major offshore gas discoveries, the Tamar and Leviathan fields, are both owned by the
same consortium (Noble Energy, the Delek Group and the Ratio Group). The lack of
decisiveness in dealing with the resulting concentration of the gas market, which will
be a vital economic asset for Israel in the coming decades both domestically and in
terms of export, has been embarrassing for the Israeli regulators and the Government.
The third issue facing the Minister of Finance is to deal with the critical housing situation
in Israel, especially for first-time buyers and lower income groups. Any solution to this
problem will involve simplifying Israel’s planning regulations, and the release by the
Government of at least a portion of the large reserves of real estate held by the State.
Israel will continue to be a centre for technological innovation, and despite the
geopolitical environment, Israel will continue to offer attractive investment
opportunities. As soon as the uncertainties surrounding the commercial exploitation
of the major offshore gas discoveries are resolved (issues including the right to export
gas, the level royalties to be paid to the State, and the need for competition and
competitive pricing in the natural gas sector), the result will be a dramatic boost for
the Israeli economy. There are many reasons for optimism for doing business in Israel.
Herzog Fox & Neeman is Israel’s leading law firm and has earned the reputation of market leader with over 260 lawyers
of whom more than 90 are partners. The firm has some of the brightest legal minds in the profession, possessing
both intimate knowledge of local markets and a clear understanding of global business. HFN employs over 60 dualqualified,
foreign-born lawyers who have worked at leading firms in the U.S., the UK and Australia. In keeping with the
firm’s global perspective, the majority of HFN’s business is conducted in English and lawyers work closely with leading
firms in jurisdictions around the world.
As Israel’s most innovative firm, HFN is called upon to lead prominent and influential transactions in every industry
– resulting in unrivalled experience in cross-border and domestic transactions. HFN has over 30 departments and
specialist sectors, more than any other law firm in Israel, which serve our clients' needs and deliver comprehensive
results. HFN’s clients are a diverse group operating across a broad spectrum of industries, ranging from small domestic
businesses to multinational corporations with operations in Israel. A sampling of clients includes: private and publiclytraded
industrial and commercial companies, venture capital and investment funds, financial institutions including
local and foreign banks, Hi-Tech companies, government companies and entities, academic institutions and private
HFN’s commitment to excellence is reflected in its prominent status in all major international and domestic publications.
The firm has received top-tier rankings for consecutive years in almost all major practice areas in leading directories
including: The European Legal 500, Chambers Global, IFLR 1000, BDI and Dun and Bradstreet. HFN is the mostly
highly ranked amongst all Israeli law firms, and was selected as Israeli Law Firm of the Year by the Financial Times and
Mergermarket, IFLR, Who’s Who Legal and others.
Alan Sacks heads HFN’s International Practice and Banking and Finance department. Alan arrived in Israel shortly after
having qualified as a Solicitor in England, and since then has divided his practice between two main areas of corporate
law and banking and finance.
In the area of M&A, Alan has been responsible for some of the largest transactions in Israel, including having advised
on the acquisition or sale of Israel's major banks, industrial holding companies and cellular telephone operators. Most
recently, Alan advised the sellers of the world's largest online poker site in an international transaction worth close to
In the Banking and Finance sector, Alan’s cross-border expertise, as well as his familiarity with all aspects of banking
regulation, have made him the leading practitioner in the international banking arena on all aspects of banking activity.
Alan Sacks, Head of International
Practice and Banking and Finance
office: + 972-3-692-2072
Alan Sacks email@example.com
of International Law Firms
SETTING THE BENCHMARK IsraelDesks by
ERDINAST BEN NATHAN & Co.
2014 proved to be a remarkably prosperous year for investment activity into Israel
and amongst Israeli players. A notable trend which surfaced in the last few years and
which increased substantially in the past two years is the interest of Chinese and
other Asian investors in Israel. Large transactions involving Asian investors which
took place recently include the acquisition of controlling stakes in some of Israel’s
largest corporations, such as food conglomerate Tnuva by China's Bright Food Group
and insurance provider Phoenix Holdings Ltd. by China's Fosun International Ltd.
Other notable transactions are the acquisition of Viber (communication application)
by Japan's Rakuten, of Tambour (paint company) by Singapore’s Kusto group and of
Lumenis Ltd. (minimally-invasive clinical solutions) by China's Xio Group. The current
auction for insurance provider Clal Insurance has also attracted interest by various
This has been rapidly increasing in the past few years as Israel has become a
leading force in the area of high-tech. Areas of high-tech which have soared to new
heights in particular are the fields of cyber security, real-time computing, Internet of
Things software, cloud services and big data-analytics. These fields have increased
popularity globally as concerns of privacy, security and a gravitation to all things
which make life easier and products more accessible, is exponentially growing. Digital
marketing, cleantech and life sciences have also gained traction and lead to IPOs, for
example, in the digital marketing area, Matomy Media’s IPO on the London Stock
Exchange. As these areas fall within Israel's top specialties, Israel has achieved a
clear upper hand on a global scale as one of the key players in leading technologies.
Foreign interest in Israeli companies is expected to grow in the coming years, with an
increasing focus on the high-tech sector.
It is noteworthy that although technological advancements may be viewed as Israel's
most attractive asset in the marketplace, it has not prevented sizable investments
and acquisitions of ‘old economy’ companies that have gained attraction with
overseas buyers (triggered in part by the enactment of the Law for the Promotion of
Competition and Reduction of Concentration described below), illustrated, among
other, by the recent transactions with Asian investors in the past few years.
In addition to the fast growing trend of Asian investments in Israel, there has
been a continued influx of interest by foreign investors in Israeli technology
Another striking characteristic of Israel's marketplace recently was the insurgency
of IPOs, and moreover, IPOs which were conducted on foreign exchanges, primarily
the NASDAQ and AIM. 2014 included 18 IPOs for a total value of $9.8 billion. The
past year demonstrated that many Israeli companies now have the capacity and
sufficient investment attention to hold out and take the IPO route, seizing larger
returns down the road, as opposed to the exit strategy that has been popular in
the past. Mirroring this drive to persevere forward is a new culture of mature and
supportive investors adapting to the IPO culture as well. The emerging IPO culture will
increase the number of strong billion dollar Israeli companies (known as "unicorns"),
thus ensuring greater growth and worldwide leadership.
A significant trend has been the growing presence of local and foreign private equity
and growth oriented funds (e.g. FIMI, Fortissimo Tene, IGP, QUMRA and Apax) that
have enabled Israeli companies to raise growth capital, providing an alternative to
the acquisition route. In addition to the local players, there has been growing interest
from top tier foreign funds (e.g. KKR, Carlyle, Permira, Fransisco Partners and CVC)
that have increasingly been looking to allocate capital in Israeli companies with
the aim of earning an above average return on investment. The longer investment
horizon of private equity investors has enabled companies to continue growing and
has given rise to a greater number of IPOs.
Lastly, a welcoming phenomenon is that of the world’s leading technology
corporations, such as Microsoft, Apple, Facebook and Amazon, finding Israel, known
as a tech hub or ‘silicon wadi’, as an attractive place to set up development centers.
The move by these tech conglomerates evidences Israel's strength and rapid growth.
The common strategy for the establishment of these development centers has
been through the acquisition of one or several local Israeli companies, which serve
as the foundation for the Israeli operations. These development centers have had
a positive impact on local employment, creating hundreds of job opportunities to
Israeli cities. These development centers are also a great source for further training
and exploiting the young talent in Israel which is eager to apply its knowledge on a
grand scale. Moreover, these development centers have been the source of some
of the leading edge technologies for their parent corporations. For example, Intel’s
main leading technological developments over the past decade have emerged
from its Israeli developments centers. Consequently, Israel and its players have
become an integral and important part of these multinational corporations, further
strengthening ties between Israel and the global market.
In response to the abovementioned trends, and more specifically regarding the
interest of Asian and other foreign investors, Israeli law firms will have to better
adapt to the changing marketplace and have quickly caught on to respond to the
needs of the changing Israeli market place. We have seen firsthand the penetration
of Asian investors into the Israeli market through investments in several of our startup
clients, in the context of M&A, venture capital and joint ventures transactions
we are involved in, and in the context of distributorship relations and other similar
agreements that some of our big clients developed with large Chinese companies
that seek to penetrate the Israeli market. These transactions require specific
experience, expertise and cultural knowledge to efficiently manage negotiations,
transactions and post-deal relations with clients and counterparties from the Asian
Following the success of the past few years, and especially 2014, and seeing the
high level of activity in the first half of the present year, we estimate that the rest of
2015 and possibly the coming years are likely to follow in 2014’s lead. Israel’s upper
hand advantage as a leading force in the fields of cyber-security, Internet of Things
and big-data analytics, should secure the interest of foreign investors worldwide.
Moreover, the movement surrounding the natural gas developments in Israel is likely
to attract additional investment interest to Israel in the coming years.
The Israeli economy is a vibrant place for transactions. The local culture in Israel plays
a significant part in the thriving marketplace and soaring number of record deals.
Israeli entrepreneurs, developers and investors are of extreme ambition, without
the fear of failing and willing to drive past any obstacles. These characteristics
result in global leading inventions and technologies which are ahead of other much
larger countries. The talent pool in Israel makes it a unique place to invest in. Israelis
tend to be straight to the point, and determined. Transactions and interpersonal
relations during the span of a transaction in Israel are less formal than in other
parts of the world, providing ease to the deals. Nonetheless, carrying out deals in
Israel resembles the basics of deals in the United States, whether it is in the style
of drafting transactional documents, in the standard terms and conditions which
are applied or the common way of doing business. The large number of American
investors in Israel is a result (and possibly a part of the cause as well) of this similar
approach to transacting. Above and foremost, Israelis can be known for their loyalty
to the letter of contract, which they stand by throughout.
In December 2013 a new law entitled the Law for the Promotion of Competition and
Reduction of Concentration, 5774-2013 (the "Law") was enacted. The purpose of
the Law is to reduce the concentration in the marketplace and therefore encourage
and support competition. The main aspects of the Law are with respect to limiting
pyramid structures within corporations and preventing against the holding by one
entity of both significant financial services businesses and industrial business.
As buyers within Israel for deals of this magnitude are limited, important international
investors, private equity funds and the like are expected contenders for the
divestments that will occur as a result of the Law. However, already the effects of this
Law have been felt. For example, Delek Group Ltd. was obliged to sell its controlling
stake in Phoenix Holding Ltd. (to China's Fosun International Ltd.), in order to comply
with the new Law's previously mentioned restrictions. This immediate reaction
and activity is due to corporations hurrying to divest immediately at a reasonable
value, as opposed to undergoing fire sales closer to the compliance date and losing
Compliance with the Law must be completed by December 2019. This new
Law will strengthen economic activity as it mostly affects larger corporations,
creating a potential for many large deals in the coming years.
A full-service law firm specializing in civil and commercial law, EBN contributes to the success of both its domestic and
international clients through a depth of legal expertise, multi-jurisdictional experience and commercial and creative
solutions. Our comprehensive legal expertise includes mergers and acquisitions, , corporate law, hi-tech, commercial
litigation, media and communications, energy and infrastructure, securities and capital markets, antitrust, tax, tenders,
real estate, and labor law.
Mergers & Acquisitions
EBN's M&A department has been at the heart of M&A activity in the competitive Israeli market since the department
was founded 25 years ago. This respected track record combines with the extensive international experience,
professionally and educationally, of EBN’s partners and associates and ensures the Israeli and global clients receive a
comprehensive and first rate service in their domestic and outbound activity.
These advantages ensure that EBN is instructed on the more complex M&A transactions in the Israeli market, especially
in sectors where EBN has a stronghold, such as telecoms, hi-tech, cyber security and funds.
Roy specializes in mergers and acquisitions, hi-tech, commercial and corporate law, securities, and capital markets, with
focus on cross border M&A and investment transactions.
Thanks to his dual membership in the Israel and NY Bar Associations, and diverse experience both locally and abroad,
Roy’s clients enjoy legal services tailor made to their every need. Moreover Roy provides clients with a 24/7 response
that comes with a creative and business oriented approach to their legal challenges, using the benefit of EBN’s various
Notable transactions in which EBN M&A department was involved in recent years include:
- Representation of Tene Investment Fund and other sellers in the sale of their holdings in Netafim to Permira, a global
private equity fund, at a company valuation of US$830 million;
- Representation of NSO and its shareholders in a the sale of a controlling stake to a global US private equity fund for
- Representation of Eden Springs (May Eden) in its acquisition by Rhone Capital;
- Representation of Diwip, and its shareholders in an auction for the sale of the company and in its acquisition by Imperus
Technologies, a Canadian public company traded on the Toronto Stock Exchange. Total matter value was US$100 million;
- Representation of Motorola in numerous M&A transactions, including the sale of its holdings in the cellular operator
Mirs to Altice.
Nathan & Co.
Roy Caner, Head of M&A
office: + 972-3-777-0150
Roy Caner firstname.lastname@example.org
Yigal Arnon & Co.
The Israeli legal market has undergone a robust expansion during the last 25 years,
and litigation has been no exception. As an increasing number of multinational
conglomerates have entered the Israeli market and established a business presence
(nearly 300 multinational companies currently operate R&D activity in Israel), and
while Israeli society and the economy have further matured, the practice of litigation
in Israel has had to adapt in order to meet international standards as well as to service
local demand and expectations. This change is particularly evident in terms of Israel’s
modern and sophisticated procedures as well as with respect to causes of action,
international litigation and consumer rights.
The Israeli Basic Law
The Judiciary (which is part of Israel's informal "Constitution"), provides for important
principles of civil procedure, such as the right to appeal as well as the public nature
of a trial. Our court system is adversarial and not inquisitorial. The judge’s role is to
determine the facts and apply the relevant law, not to investigate. Juries are not used
in the Israeli legal system. All questions of fact and law are determined by professional
judges. The statute of limitation period for civil claims in Israel is longer than in many
other jurisdictions and is generally seven years.
The adjudication process is governed by the principles of due process and guarantees
the basic right of any individual to be heard in court. The Rules of Civil Procedure
govern the conduct of litigation proceedings in the Israeli court system. There are no
pre-filing requirements and in some cases, mandatory mediation is applicable after the
filing of the action. A number of pre-trial discovery devices are provided for in order to
enable disclosure of information among the adverse parties including interrogatories
and disclosure and inspection of documents.
Most testimonies are filed in written form and the witnesses and experts of the
parties are then subject to live cross-examination before the court at scheduled
evidentiary hearings and in re-direct examination. The trial is usually not confined
to one concentrated period of time or consecutive days and typically consists of a
Unlike the U.S. system, however, there is no system for conducting pre-trial
depositions. Israeli litigation procedure differs from US and English style of
summary judgment so if a claim survives a motion to dismiss, it will proceed to
trial (unless settled).
series of sessions taking place over a period of several weeks or even months (the
absence of a jury makes this possible). In general, Israeli courts do not award punitive,
exemplary, or other non-compensatory damages (although some case law provides
that they are authorized to do so in a certain limited capacity), and damages awarded
are almost always calculated on a compensatory basis. Legal aid is available through
several procedures and organizations, state-sponsored legal aid as well as through a
pro bono program of the Israeli Bar Association.
Israeli law and procedure are well equipped to deal with a modern consumer society
in general and with respect to product liability in particular. Under Israeli law product
liability may arise under several areas of law, including tort, contractual liability, the
Consumer Protection Law, 1981 and the Defective Products Liability Law, 1980.
The Defective Products Liability Law applies only to bodily injuries and does not
extend to indirect, consequential, or pure economic damages. It provides a nonexclusive
cause of action, and imposes strict liability on manufacturers to compensate
consumers who suffered bodily injury as a result of using their defective products.
The main purpose of this law is to protect consumers and facilitate their claims
for bodily injury by exempting them from proving any fault or negligent act on the
manufacturers’ part while at the same time providing the manufacturer with limited
defenses. Unlike in other jurisdictions, the remedies for breach of contract cover both
direct and indirect damages as well as pure economic damages. Likewise, the Torts
Ordinance provides compensation for both direct and indirect damages as well as
pure economic damages.
The two most relevant torts for product liability cases are negligence and breach of
statutory duty. The tort of negligence imposes liability on any person or entity that
performed a negligent act or omission that caused damage to any person or entity
towards which the former owes a duty of care. The tort of negligence is general in
nature and it may be applied in various circumstances and relationships, and is thus
shaped by the courts based on legal policy considerations, determining inter alia
in which circumstances a duty of care between the opposing parties exist, and the
acts or omissions which constitute negligence (namely, the acts or omissions which
constitute breach of that duty).
The Consumer Protection Law imposes various obligations to consumers who
purchase products or services for personal, family or domestic use. This raft of
obligations include a prohibition on misrepresentation, duties of disclosure, duties
concerning product labeling and other similar types of duties and prohibitions. It
contains various post-sale duties, mainly with respect to warranty periods and terms;
repair of defects; technical service and more.
The Class Actions Law 2006 allows for the filing of class actions under various
circumstances, using an ‘opt-out’ mechanism, namely, any person or entity that
falls under that definition becomes a member of the class, unless they provide a
withdrawal notice (while the court is allowed, under special circumstances, to apply
an ‘opt-in’ mechanism). The filing of a class action is subject to the court’s approval
and discretion, and is subject to meeting several conditions: (1) the action must raise
material questions of fact or law that are shared by all members of the class; (2) there
must be a reasonable possibility that the legal or factual questions will be decided
in favor of the class; (3) a class action must be the efficient and fair way of resolving
the dispute under the circumstances of the case; and (4) there must be a reasonable
basis to assume that the interest of all members of the class will be represented and
managed properly and in good faith.
These requirements are examined by the court in the scope of a preliminary motion to
approve the action as a class action (motion for class certification), in which the court
examines whether the forgoing requirements are met. At such a preliminary stage, the
court examines the alleged cause of action on its merits with respect to both the legal
and factual aspects.
The enactment of the Class Actions Law has led to a substantial increase in the
number of consumer rights and product liability cases as well as to the significant
development of case law on consumer rights, duties of disclosure, duty to warn,
product labeling, and other matters.
In one of the most interesting product liability cases in Israel to date, it was discovered
in 1995 that an Israeli manufacturer of various food products added silicone
(dimethylpolysiloxane) to its low-fat long-life milk product in order to prevent foaming.
This was in violation of official standards and in contradiction to certain statements the
company previously made. There was no question that the addition of this substance
did not pose a real threat to the well-being of consumers. The manufacturer and some
of its officers were convicted of violating an official standard and misrepresentation
was filed, which was certified and approved by the Israeli Supreme Court in 2003, and
called for compensation of the class members for injury to their ‘autonomy of will’.
This was a precedent-setting decision that ruled that this type of damage is covered
by the definition of ‘damage’ in the Torts Ordinance, and is recoverable by way of a
Cross-border litigation in Israel
In response to international cross-border litigation extending into Israel, Israeli
litigation now features unique aspects of dispute resolution, both in substance and in
procedure. These include the international jurisdiction of Israeli courts, conflict of law
rules, enforcement of foreign judgments in Israel, international arbitrations and legal
co-operation between states in civil and commercial matters, to name just a few.
In cases where a multinational conglomerate is litigating in Israel, there is a level of
expectation to receive the highest quality of legal service and attorney attention
that matches other jurisdictions, particularly the US or EU. Both the Israeli legal
market in general, and our firm in particular, has adapted to this high standard. While
international law firms are currently legally permitted to operate in Israel, subject to
certain restrictions, such international law firms do not currently litigate in Israel. It is
largely left to domestic firms, such as ourselves, to handle the wide range of litigation
in the Israeli market..
The Israeli legal market has evolved to respond to the needs of a modernized
consumer society by, among other things, adapting and encouraging modern
and sophisticated forms of class and group actions, similar to US-style class
Ruth Loven, Partner
Established almost sixty years ago, and currently numbering over 150 lawyers, of whom 52 are partners, Yigal Arnon &
Co. is one of the most professional and dynamic law firms in Israel, with a proven track record of innovation and quality
in meeting its clients’ needs. With its focused practice groups, Yigal Arnon & Co. combines the expertise of a specialty
boutique practice with the advantages of a well-resourced multidisciplinary law firm.
The firm has established a unique International Litigation and Class Actions practice, including cases that are the "Israeli
front" of large and complex matters. The practice represents foreign entities in cross-border disputes and attracts
clients who are the leading and major players in nearly all international markets: Banks; Telecommunications and Internet;
Real Estate Companies; High Tech (Software, IT, Semi Conductors, Internet and E-commerce); Venture Capital Funds;
Consumer products; Medical related (pharmaceuticals, bio tech, life sciences, medical devices); Media and more.
The practice has developed an expertise with regard to distinctive aspects of international litigation, both in substance
and in procedure, such as international jurisdiction of Israeli courts, conflict of law rules, enforcement of foreign
judgments in Israel, international arbitrations and legal cooperation between states in civil and commercial matters.
The firm's experience and expertise in class actions is unparalleled. We have handled to date hundreds of class action
defense cases, many of which involve foreign clients, in wide-ranging areas, including product liability, consumer fraud,
false advertising, insurance, banking, securities and capital markets, communications, labor and employment, antitrust,
privacy, mass torts, environmental matters, education laws, flight and transportation, agriculture and mroe.
The practice also has a special expertise in Intellectual Property Litigation, focusing on enforcing copyright and related
proprietary rights as well as defending against claims in these areas.
Throughout our history, clients have turned to Yigal Arnon & Co. when seeking professionalism, service and integrity in
helping them to resolve complex and challenging legal problems.
Ruth Loven is a partner in the litigation and class actions department, specialising in civil and commercial litigation and
class action suits. Ruth also has expertise in international intellectual property disputes, product liability, mass torts and
crisis management. Ruth gained vast experience in defending her clients in difficult and complex legal disputes. Ruth
has represented large Israeli as well as international companies in high profile class action suits and mass torts, including
defence in internet services, lawsuits against tobacco corporations, product liability cases, anti-trust cases, lawsuits
dealing with cellular radiation and other environmental matters, and many other matters which have received significant
attention within the public debate. Ruth is especially skilled in handling highly sensitive issues concerning public interest.
Over the years, Ruth has become particularly acquainted with various foreign legal systems and IP regulations, enabling
her to formulate comprehensive and well established defences for her clients. Ruth recently co-authored (with Yigal
Arnon & Co,'s senior partner Barak Tal) The Israel Chapter for ICLG Class & Group Actions 2013; and The Israel Chapter
for Getting the Deal Through - Product Liability 2014.
office: + 972-3-608-7900
Ruth Loven email@example.com
Shibolet & Co.
Lior Aviram, Vered Horesh
As of the end of 2014, Israel boasts the highest country-wide number of hi-tech
startups per capita in the world.However, since authors Dan Senor and Saul Singer
called attention to “Startup Nation,” an increasing number of analysts, investors, and
entrepreneurs have been asking whether Israel can build not only a wealth of startups,
but an industry that creates and sustains Israeli-based global corporations. Based
upon recent findings, Israel has begun producing a considerable number of sizeable
companies, a trend that will continue. According to current studies,Israel is the first
ranked hub outside the United States based on performance, funding, talent, market
reach, and startup experience – a mature ecosystem able to support this growth.
The drastic growth in the number of IPOs of Israeli hi-tech companies has also
contributed to the total increase in number of exits. Not a single Israeli hi-tech IPO
was reported in 2012. In 2013, however, eight Israeli companies closed IPOs, while
in 2014, 17 Israeli hi-tech companies went public. And based on published first-half
numbers, the number of IPOs at the end of 2015 is expected to settle at points lower
than 2014, but still higher than 2013. In no uncertain terms, Israeli hi-tech IPOs have
This rise in exit numbers has not transpired because Israeli companies are carelessly
opting to exit. Between 2004 and 2007, the average time-to-exit for Israeli hi-tech
companies was between 5 and 10 years, while from the end of the financial crisis,
between 2011 and 2014, the average time-to-exit was lengthened to between 10
and 15 years.This expansion is particularly noteworthy in light of the relatively stable
global average time-to-exit for hi-tech companies (with a slight rise in the average
time-to-IPO and a slight drop in the average time-to-M&A).It is striking, furthermore,
that average Israeli hi-tech company proceeds from exit reached $212 million in 2014
– more than 2.5 times average exit proceeds in 2011.
On the IPO side, returns of late have similarly swelled. Total proceeds from IPOs in
2013 amounted to $361 million,and in 2014, IPOs raised more than $2 billion, with
2015 expected to maintain this level. In addition, IPO proceeds represented only
Since the market low in 2010, a steady rise in the number of exits of Israeli
hi-tech companies has occurred. This trend, which has consistently applied to
Israeli hi-tech companies on the selling side, has, in the last couple of years,
also come to include Israeli companies large enough to be on the buying side.
The number of unicorns emerging from Israel also shows the accelerating
strength of the Israeli hi-tech market. Since the beginning of 2013 alone,
Waze was sold to Google for $1.1 billion, Mobileye raised almost $890 million
at a market value of $7.6 billion,13 and Wix has been valued at over $1 billion
following its IPO.
16% of total exit proceeds in 2013, while in 2014, Israeli companies that opted for
an IPO received 66% of total exit proceeds, showing that more and more companies
are choosing the IPO path over the M&A path, resulting in a larger number of mature
companies inhabiting the local ecosystem.
Other companies yet to move to exit that have also been valued at or above the $1
billion mark include Taboola and ironSource. This phenomenon is sure to escalate as
the number of experienced entrepreneurs founding more than one startup is also on
the rise, having grown from 16% of all entrepreneurs to 25% in just five years.
Israeli companies and entrepreneurs have surely benefitted from these developments,
while investors have also been rewarded for investing their money in Israel, as opposed to
other markets. According to studies conducted jointly by our firm and Fenwick and West
LLP, investors are consistently offered better preference rights in Israel, in contrast to
Silicon Valley. Between 2011 and 2014, upwards of 70% of financing rounds (amounting
to $500,000 and more) included senior liquidation preferences for those choosing to
finance the Israeli startup scene, as opposed to 40% for those choosing to invest in
Silicon Valley. Furthermore, investors' potential to double dip in Israel is at an annual rate
well above 50%, whereas in Silicon Valley, the annual rate has dropped below 25%.
Investment terms are better for those consummating transactions in Israel rather than
Silicon Valley, and the price of the same equity stakes in comparable companies is
cheaper in Israel as well. Since 2010, venture startups have been valued at an average
of $4.9 million in Silicon Valley, while in Israel, similar companies have been valued at
an average of $3.6 million. Those injecting funds into Israel have surely been satisfied,
moreover, with the relative return on their capital: In 2014 the average successful USbased
startup raised $41 million and exited at slightly over $243 million, at an average
value creation of 5.9X. In contrast, since 2011, similar Israeli startups raised $28 million
(diluting the investors less along the way) and exited at roughly $192 million, at an
average value creation of 6.9X.
A wide variety of venture investors are increasingly taking note of the strengthened
Israeli hi-tech industry. In 2014, for example, foreign investment, overall, amounted
to $1.9 billion, accounting for 56% of the funds raised by Israeli hi-tech companies.
Particularly conspicuous in recent years among foreign investors has been the entry of
Chinese investors into Israel. NineChinese-based investors invested in Israeli hi-tech
in 2012. That number rose in 2013 and yet again in 2014, when a total of 22 Chinesebased
financiers invested almost three times the amounts invested by Chinese
investors in 2012. The Chinese appetite for Israeli hi-tech has not stopped at direct
investment in startups, as investors from China account for approximately 30% of
the capital raised by Israeli VC funds. Additionally, Russian venture capital investment
firms have shown rapidly increased willingness to devote funding to Israeli hi-tech
companies. Foreign corporate investors have been active in Israel too. For example,
Intel Capital made six first investments in Israeli companies in 2014, Microsoft Ventures
made six of its own, and Samsung Venture Investment Corporation added four more.
While the high local demand for funding has mostly been filled by foreign investors,
Israeli VC funds have also lately gained growing contributions. In 2012, Israeli VC
funds raised a total of $885 million, in 2014 they far surpassed this number raising a
total of almost $1 billion, with a greater than 20 percent increase expected by the end
In the wake of the enactment of the US JOBS Act in April 2012 and growing public
interest, the Israeli Parliament received a bill proposal that included provisions similar
to the JOBS Act. This development inspired robust public discussion among relevant
interest groups, leading the Israel Securities Authority to propose regulations for
crowdfunding based on an early 2014 report by the Committee for the Promotion of
Investments in R&D Public Companies. This legislative process is expected to rapidly
bear fruit, with crowdfunding thresholds being significantly reduced. Despite the
regulatory lag, however, in 2014 four of the top five angel investor groups placing
funds in Israeli hi-tech companies were Israeli crowdfunding platforms powered, under
current limitations, by accredited investors only.
The entire Israeli hi-tech industry has prospered from this increased investor confidence
– The size of the average hi-tech financing round in Q2/2015 was almost double the
average registered in Q2/2013 – especially the information technology, enterprise
software, and internet sectors, which have attracted relatively large amounts of
capital of late. More particularly, the prominent Israeli cyber-security segment has
recently shown marked growth, as over 100 cyber-security startups incorporated in
2014, while Israel continues to export more cyber-security products than every other
country but the United States. Viewed in light of the rising number of cyber-attacks
world-wide, the Israeli economy’s response, with its roots deep in Israel’s military and
intelligence legacy, is not surprising.
Israel built its reputation for high-end hi-tech innovation in the 1980s and 1990s. This
period sprouted large global companies such as Amdocs and Check Point Software
Technologies, but for years, these and a handful of other companies were the exception
and not the rule, as most Israeli hi-tech companies opted to cash in quickly. In recent
years this pattern has begun to change. Investment amounts continue to grow,
emanating from a higher variety of sources, with legislation expected to provide the
freedom for this trend to continue. In turn, Israeli companies have allowed themselves
to reach unprecedented levels, while providing returns that can compete with, if not
surpass, returns anywhere.
The crowdfunding scene is likewise growing ever more vibrant, although
legislation in Israel still grants only accredited investors the freedom to fund
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 mergers & acquisitions, hightech,
life sciences, securities and capital markets, intellectual property, project finance, real estate and infrastructure, tax,
employment, antitrust, banking and financial institutions, and media and entertainment. Shibolet's high-tech and venture
capital practice is among the largest and most recognized in Israel, as more than half of the firm's entire practice is hightech
related. For over three decades, the firm has represented entrepreneurs, startups, mature technology companies,
venture capital funds, multinationals, angel investors and corporate investors for all their M&A and other transactional and
Shibolet has established some of Israel’s leading venture capital funds and represents them and other domestic and foreign
funds through their due diligence processes and investments. The firm has special expertise in this practice from the early
days of the Israeli venture capital industry and acts extensively on behalf of major Israeli, US and European venture capital
funds with respect to their investments in portfolio companies. 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 IP-related transactions, including
licensing and OEM agreements. The firm has also 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 & 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 crossborder
transactional work, representing clients from the US, Europe, China, Japan, Korea, India and many other countries
in Asia and Africa.
Amongst other areas, the firm has a particular focus on representing multinationals and their subsidiaries in Israel, and
acting as legal counsel on intellectual property structure, R&D and governmental grants, regulatory approvals and tax
Lior Aviram, Partner
Vered Horesh, Partner
office: + 972-3-777-8333
Lior Aviram firstname.lastname@example.org
Vered Horesh email@example.com
Gornitzky & Co.
Pinhas Rubin, Daniel Paserman
Change of a Business Model - International Acquisitions of Israeli
International corporations are extremely interested in acquiring Israeli technology
and start-up companies. Following such acquisitions, multinational corporations tend
to restructure the business model of the acquired company by selling or licensing
its intangible assets to a related party abroad, and following the transfer, the Israeli
company may become a service provider of R&D services to the related company.
Essentially, not only is the Israeli company acquired, but it also undergoes a change in
its business model.
Over the past few years, the Israeli Tax Authority (“ITA”) has started examining these
business model changes more closely, particularly in cases of technology companies.
The ITA examinations aim to ensure that intangible assets are not being transferred
abroad at below market prices which inappropriately reduce the Israeli tax base. If a
transaction is found to be made at below market value, the ITA may challenge the
value of the intangible asset and attempt to adjust the transaction price to reflect the
higher value. The adjustments in the transaction price subsequently impose additional
tax liabilities on such transfers. The ITA may also require the reclassification of the
licensing of an intangible asset as an asset sale. Additionally, after making an initial
adjustment to a transaction, the ITA may attempt a secondary adjustment, which will
impose an additional liability on the intercompany charge.
In recent years, the ITA has issued numerous tax assessments reclassifying business
model changes which have resulted in increases of hundreds of millions of dollars in
tax liabilities. Some of these assessments are still being negotiated with the ITA, while
others are in the initial stages of being litigated in courts. Awareness of the current
trends and developments in the area may allow the parties to plan their transactions
ahead in a manner which will avoid such disputes with the ITA.
Tax Incentives for Foreign Residents in Israel
Israeli tax legislation is constantly being developed and modified to incentivize foreign
residents to invest in Israeli companies. To that effect, several amendments adopted
in recent years were legislated to alleviate the tax burden imposed upon foreign
residents, and thereby, to make investments in Israel more attractive. One of the key
examples of this trend is the exemption from capital gain tax.
According to current Israeli tax law, a foreign resident will be exempt from capital
gains tax over the sale of shares in Israeli companies, if the capital gains are not
derived from the operation of its permanent establishment in Israel. It is important
to note that those exemptions may not apply where the majority of the company’s
assets consist of real estate or natural resources. Additionally, at this time, Israel is
a party to more than 50 bilateral treaties which provide various forms of tax relief to
The Law for Encouragement of Capital Investments
Israel supports capital investment initiatives by developing and granting a wide
range of incentives and tax benefits. These tools are designed to boost productivity
in certain industrial sectors, encourage exports, increase Israel’s overall economic
revenues and promote its overall growth. To attain these goals, Israel has passed a
number of laws such as the Law for Encouragement of Capital Investments (“the
The Encouragement Law went through several changes in recent years in an effort to
redesign its provisions so that it will attract investors on the one hand, and it will be
simplified to contribute to achieving its various goals on the other. The amendment
also contained a moderate increase to the tax rate to be imposed on benefited
enterprises following the application of the Encouragement Law’s benefits. Today,
the law includes two corporate tax rates: 9% for investment in certain rural areas the
government wants to prioritize and 16% for other geographic areas. In addition, the
withholding tax rate for benefited individuals is 20%, instead of the withholding tax
rate applicable otherwise (25-30%).
It should be noted that recently, a new inter-ministerial committee has reexamined
the provisions of the Encouragement Law and its recommendations may trigger
The Expected Change to Digital Financial Activities
According to existing law, a foreign corporation’s income is only taxable if it has been
produced in Israel. If the foreign corporation is from a treaty country, the corporation
must have a “permanent establishment” in Israel for its income to be taxable.
In light of the tremendous proliferation of financial activities via the internet and taking
into account the OECD and G-20 efforts to address the international tax challenges
of the digital economy, the ITA sought to redefine some of the key concepts of our
tax regime, and published a draft of a “game changing” circular explaining its views
regarding the taxation of income produced from services provided online. The draft
expands the definition of a “permanent establishment” so that it might apply to a
business if the core of its financial activity is via the internet, regardless of the physical
location of its server. In determining whether such a corporation has a “permanent
establishment”, the ITA will consider indications such as the adequacy of the internet
website to Israeli users (its language, style, currency, etc.); its use to connect Israeli
consumers with Israeli suppliers; its popularity with Israeli consumers; whether the
foreign corporation is exposed to business risks in Israel; and so forth.
Regarding VAT liability, a foreign corporation might be required to register as a licensed
dealer and its transactions might be subject to VAT, if its internet activity has tight and
direct ties to Israeli clients.
The draft, with its far-reaching applications, is now open for public comments, and
may be amended adequately.
Tax Benefits to New Immigrants and Returning Residents
Israeli law defines an Israeli resident for tax purposes by using the “center of life” test
which examines the individual’s family, economic and social ties. The application of
the test is assisted by two rebuttable presumptions regarding the number of days
the individual has spent in Israel within a certain period of time. The law offers some
benefits to new immigrants (who become Israeli tax residents for the first time) and
veteran returning residents (who, in the past, were Israeli tax residents and became
Israeli tax residents again, after being considered foreign tax residents for at least 10
consecutive years). For example, the benefiting individuals enjoy a 10 year tax and
reporting exemption with respect to foreign source income and assets.
Taxation of Trusts
In 2006, Israel passed a comprehensive tax reform, which introduced an unprecedented
tax on certain foreign trusts and foundations with Israeli settlors or beneficiaries. In
2014, the Israeli tax law was further redesigned in order to increase the scope of Israeli
tax collection, in light of Israel’s growing deficit. The government sought to increase
tax collection from trusts and foundations, inter alia, by imposing tax liability on foreign
trusts and foundations which were previously exempted.
According to the current law, a trust that has been settled by a foreign settlor, but has
an Israeli beneficiary (except for Israeli charity institutions) are liable to Israeli taxation.
Nevertheless, if all the trust’s Israeli beneficiaries are “related by family” to the settlors,
certain tax reliefs may apply. Tax reliefs are available to trusts and foundations where
the settlors and beneficiaries are new immigrants or returning residents. Additionally,
the 2014 reform imposed certain new reporting requirements. In general, the 2014
reform created a complex body of law, and, currently, there is a limited number of
judicial rulings which serve to clarifying its provisions.
On September 2014, the ITA launched a new voluntary disclosure program (the “New
VDP”). The New VDP enables non-compliant taxpayers to come forward and arrange
their reporting and tax obligations in exchange for the ITA’s (in collaboration with the
State Attorney) undertaking not to initiate any criminal proceedings against such
taxpayers. The New VDP applies to any undisclosed passive or active income and
assets, whether in Israel or abroad. However, the New VDP does not apply to income
originating from illegal activities. The New VDP replaces previous programs and is in
effect until the end of 2016.
The New VDP also includes two special application tracks which will be in effect until
a) Anonymous applications – the application is submitted on an anonymous basis
and the identity of the taxpayer is disclosed only after a tax agreement has been
reached with the civil officer.
b) “Green Track” applications – if the total capital included in the application does not
exceed NIS 2 million and the aggregate taxable income does not exceed NIS 0.5
million, the taxpayer may apply for this route.
Real Estate Reform
House prices in Israel have soared dramatically in recent years. The government took
several steps to cool the market and reduce the cost of residential apartments,
including canceling previously existing exemptions from land betterment tax and raising
purchase tax brackets regarding purchases of residential apartments (particularly for
foreign buyers or acquisitions of luxury residential apartments).
Pinhas Rubin, Chairman and Senior Partner
Daniel Paserman, Head of tax and fund
Gornitzky & Co.
Stellar Corporate & High Net Worth Client Base: Gornitzky is unarguably Israel's top tax law firm. Gornitzky is ranked
by ALL legal guides worldwide as a Band One tax law firm, and its Partners are recognized leaders in this field. The team
demonstrates its strength, working with a large number of the most high profile Israeli and overseas corporates entities
with high end tax matters involving Israel. The firm represented over one third of Israel's largest and most influential
business groups and 70 per cent of the top Israeli billionaires (according to Forbes). The legal team is particularly well
known for its creative thinking and innovative domestic and international tax planning, including, in particular on multijurisdictional
Gornitzky's Tax Practice: For more than 75 years, Gornitzky has been at the forefront of the Israeli tax practice and
has been involved in many of the most complex tax cases in Israel. The firm provides all types of tax law advice, including
domestic and global corporate tax, reorganizations and cross-border structuring, capital markets & 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. Gornitzky is one of a very short list of firms in Israel which practices in all of
these sub-categories of tax. Gornitzky also has deep experience in leading negotiations with the Israel Tax Authority in
all matters relating to tax issues. The lawyers represent clients before all judicial bodies, including the Supreme Court of
Israel, and have won many breakthrough cases.
Pinhas Rubin: Chairman and Head of Gornitzky, who is considered by the Israeli financial press to be a "key position"
holder and was listed therein as one of the people who will "open any door for you". The Marker Magazine has repeatedly
identified him as one of the 100 most influential people in the Israeli economy, and leading international legal guides
named him "a super lawyer" and "the best lawyer in Israel". Mr. Rubin is a reputable expert in numerous fields; particularly
in tax, and trusts and estates. He has been regarded for many years now as Israel's top tax law expert.
Daniel Paserman: The head of Gornitzky’s tax and fund formation practices. Mr. Paserman also serves as the secretary of
STEP Israel (Society of Trust and Estate Practitioners). Mr. Paserman is involved in intricate corporate and individual tax
planning - both domestic and cross-border. Mr. Paserman is active in a wide range of complex tax rulings, reorganizations
and tax assessments. Mr. Paserman's broad experience also includes negotiations vis-à-vis the Israel Tax Authority and
the litigation of tax disputes before various judicial bodies. In addition, Mr. Peserman specializes in taxation of trusts and
estates and provides tax planning guidance for high net worth individuals.
office: + 972-3-710-9191
Pinhas Rubin firstname.lastname@example.org
Daniel Paserman email@example.com
Agmon & Co. Rosenbe rg
Hacohen & Co.
The Israeli capital market is a developed and supervised market, with one stock exchange
– the Tel Aviv Stock Exchange.
Special Characteristics of Offerings in Israel
The main characteristics of offerings in Israel are bonds offerings, the ability to issue
participation units in partnerships engaged in the oil, gas and film industries and the
existence of a dual listing arrangement.
In recent years, most of the securities offering in Israel have been bonds offerings.
While in other countries, bonds are usually traded over-the-counter (“OTC”), in Israel
they are traded on the stock exchange. The bond offerings were mainly made by real
estate companies, with a secondary trend being the offering of bonds of American real
estate companies; and by banks. By way of example, we represented Bank Leumi in the
publication of a shelf prospectus and in a public offering of bonds in the total sum of
US$ 753 million in 2015.
Of all the bond offerings carried out in 2014, approximately US$ 5.55 billion were
listed for trading on TACT Institutional, of which approximately US$ 3.44 billion were
At the end of June 2015' 588 corporations
(companies and partnerships) were traded on
the Tel Aviv Stock Exchange
Corporations that had issued
shres, shares and bonds, or
participation units in partnership
to the public
Campanies that had issued bonds
Campanies that had issued ETFs'
currency ETFs and structured
Campanies are traded on TACT
(Tel Aviv Continuous Trading)
Institutional listing (a system for
trading between institutional
Market Value July 2015
Shares and 238
raised from foreign institutional investors. Two of the largest offerings were the US$
1.82 billion raised to finance the development of the Tamar and Leviathan natural gas
reservoirs (where we represented the issuer), and an US$ 819 million raised by ICL
(where we represented the underwriters).
Listing of Participation Units in Partnerships
Investors in these participation units also enjoy certain tax benefits. Recently, the
Regulator has been examining the possibility of expanding the permissible operations
for partnerships to also allow oil and gas explorations outside of Israel, under certain
Dual Listing of Securities
In Israel, there is an arrangement for the "dual listing" of securities whereby shares
that are listed for trading on major stock exchanges in the U.S. and London can also, in
parallel, be listed for trading on the Tel Aviv Stock Exchange. This listing uses disclosure
documents prepared for the U.S. or U.K. stock exchanges, instead of the disclosure
documents required under Israeli securities laws. A condition for the dual listing is
having a minimum market value of US$ 30 million, as well as at least one year's trading, or
alternatively, a minimum market value of US$ 150 million. Currently, 46 dual companies
are being traded in Tel Aviv under the Dual Listing Law. Our firm is advising various dual
listed companies, including, inter alia, Partner and Alon Blue Square Israel.
The Israeli capital market has extensive regulation under the Companies Law, the
Partnerships Ordinance and the Securities Law and strict supervision by the Israel
Securities Authority (ISA), as well as other supervisors who oversee the banks and
Bond offerings - by company type
2014 First Half Of 2015
In Israel, it is possible to list participation units in partnerships operating in the
field of film production, as well as in the field of the exploration, development
and production of oil and natural gas in Israel, for trading.
(US$ Billions) 2014 The First Half of 2015
Bonds offerings 15.25 8.67
insurance companies. This supervision is usually effected by the issue of instructions,
the imposition of any financial sanctions, and administrative and criminal enforcement.
In recent years, there has also been significant enforcement by the market itself, through
class and derivative actions. This was also supported by the Economic Court, as well as
by the public’s increased involvement at general shareholders meetings.
The Companies Law
The Israeli Companies Law imposes significant corporate governance requirements,
some of which also apply to companies incorporated abroad if these companies issue
securities in Israel. Recently, certain corporate governance provisions were extended
to also apply to listed partnerships. These requirements include, inter alia, a duty to
appoint external directors, a right to submit class actions and derivative actions, and
complex mechanisms for the approval of remuneration for officers and functionaries of
the company and the performance of transactions involving controlling shareholders.
The Securities Law
The Israeli Securities Law imposes duties regarding annual, quarterly and immediate
disclosure, on companies which have issued securities to the public. The scope of
the disclosure required in Israel is rather significant and the requirements under such
disclosure are routinely enforced by the ISA. Financial reports are required to be made
in accordance with IFRS demands.
The Economic Court
Several years ago, an Economic Court was established in Israel to hear corporate and
securities cases. The Court also adopts into Israeli case law many norms from the
Court in Delaware, such as the Business Judgment Rule - the requirement to set-up
independent committees of the board of directors to approve transactions involving
controlling shareholders. We represented two independent committees, one set up by
Discount Investments for the purpose of a merger transaction with its subsidiary and
another set up by Nitsba Holdings for the purpose of the merger transaction with its
The Centralization Law
During 2013, the Government decided to enact new legislation (the Centralization
Law) which requires groups holding controlling interests in major financial corporations
(such as banks, investment companies and insurance companies) and in significant nonfinancial
corporations (such as real estate, technology and communications companies)
to sell one of these assets within six years of the date of publication of the Law (i.e. by
the end of 2019). In the interim period until the sale, the financial companies may only
grow organically, and not via mergers and acquisitions. In December 2014, a list of the
significant financial and non-financial corporations was published.
The Centralization Law also deals with the breaking down of "pyramid structures" (“folding
up of layers”) and prohibits holding a chain of companies that has raised money from the
public. Under the transitional provisions, existing pyramids must reduce their chains of
holdings to only three layers by the end of 2017, and two layers by the end of 2019.
As a result of the need to fold up layers, and due to the increased regulation,
there has been a trend of companies delisting from the stock exchange. Since
the enactment of the Centralization Law, 37 companies have already delisted
In 24 other companies, the controlling shareholders are required to sell, merge or delist
their securities from trading by 2019, including 20 share companies whose shares
constitute around 5% of the total value of the stock market. This market condition
presents a commercial opportunity for investment. In this context, we represented
Delek Petroleum in an early redemption of its bonds in accordance with the provisions
set out in the Centralization Law, as well as Nitsba Holdings and Discount Investments
in merger transactions.
In light of the significant extent of the new regulation and the resulting criticism in
recent years, the ISA has initiated new substantial plans for deregulation, most of which
have not yet been enacted and it is not hard to foresee if and when they might come
into force. One of these plans is to provide certain exemptions to companies that list
for trading in Israel, during the first five years of their listing.
Other Trends in the Israeli Capital Market
Offerings on Foreign Stock Exchanges
Many Israeli companies choose to effect initial capital offerings on foreign stock
exchanges, mainly in the U.S. In 2014, 14 Israeli companies made an initial capital
offering to the public in the U.S., as opposed to only 6 companies on the TASE. Our firm
represented underwriters Goldman-Sachs and Merrill Lynch in an initial public offering
of Adama in the U.S., with respect to various aspects of Israeli law that applies to the
company; we have also represented the Delek Group in an offering in London. Both of
these offerings were frozen before completion.
Privatization of Government Companies
Recently, the Government of Israel approved a long-term plan for the privatization of
government companies in 2015-2017. In some of these companies (such as Ashdod
Port, Haifa Port and the Environmental Services Company), a full privatization is
planned. In other government companies, mainly companies with strategic importance
in the field of infrastructure such as Israel Electric Corporation, Mekorot, Israel Railways
and Israel Natural Gas Lines, and security companies such as Israel Aerospace Industries
and Refael, the Government of Israel wishes to retain possession of the controlling
shares and to sell up to 49% of the shares by way of an offering to the public. Our firm
is assisting Ashdod Port in the privatization process and is currently preparing a draft
prospectus for the purpose of an offer for sale and/or an initial public offering (IPO) of
shares of the Ashdod Port by the end of 2015.
Entry of Chinese Investors into Israel
In recent years, there has been a dramatic increase in investments by Chinese commercial
entities in Israel. Since the acquisition of 60% of the shares of Adama in consideration
for US$ 1.44 billion in 2011, Chinese companies have been very involved in all areas of
the Israeli economy - ranging from technology and medicine through industry and food
to supervised and sensitive fields, such as finances and national infrastructure. 2014-
2015 were peak years in terms of investments and acquisitions of Israeli companies by
Chinese investors, including the acquisition of 56% of the shares of Tnuva by Chinese
company Bright Food, and the acquisition of the Phoenix Insurance Company by the
Chinese Fosun Capital. This trend is very much expected to continue in the coming
Agmon & Co.
Hacohen & Co.
Ever since it was founded, our firm's top priority was providing the most professional and best quality service to its
clients. Our firm's extraordinary successes show that there are no substitutes for professionalism, creativity, dedication
The firm consists of several departments having excellent reputation, practicing matters of corporations, capital markets
and securities; civil litigation; energy issues; class actions; antitrust; planning and construction; banking and finance;
administrative law; environmental protection and many more.
Our clients include leading corporations from Israel's business and economic elite in all sectors.
Agmon's Corporate and Capital Markets department provides its clients superior service in any aspect of securities law
and corporate law, including, advising on all stages of public offerings on the Tel Aviv Stock Exchange ("TASE") (IPOs and
secondary offerings), private offering , tender offers of all forms, mergers and acquisitions, corporate governance ; Board
and sub committees responsibilities; financing and liquidity and dual listings; acting for clients before the Israel Securities
Authority ("ISA"), the TASE, The Banks supervisor and the Commissioner of the Capital Market, Insurance, and Savings.
Uri Rosenberg and Shirel Guttman-Amira, who are regarded among of the top lawyers in Israel in this field, co- head
the firm's capital markets practice. Uri, who has been personally involved in over 100 public offerings in Israel and
abroad, brings clients a wealth of experience in capital markets and securities issues, corporate finance and mergers and
acquisitions in a career spanning more than 25 years. Uri is ranked as a leading lawyer and praised consistently by clients
in the international legal directories Chambers Global and Legal 500 EMEA. Shirel joined our firm after serving as the
Director of the Corporate Finance Department at ISA, overseeing traded companies' compliance with the Securities Law
and regulations. Shirel took part in substantial legislative processes made to the Israeli Companies Law and the Israeli
Securities Law, and dealt extensively with the interpretation of these laws, their application on companies traded in the
TASE and formulating the ISA's stance for government bodies, public commissions and courts;
- Handling the raising of NIS 2.85 billion by Bank Leumi, one of the largest banks in Israel, in public offering of bonds.
- Advising the independent commission of Nitsba Holdings (1995) Ltd., regarding the negotiations that were held as
part of a reverse triangular merger with Airport City (one of Israel's largest business & hi-tech parks).
- Acting as Israeli counsel for HSBC, Barclays and Citibank in a USD 800 million offering of notes by Israel Chemicals
Ltd to institutional investors in the U.S., Europe & Israel.
- Acting as advisors for the Ashdod Port as part of a unique issuing matter that is in fact a privatization of the company.
office: + 972-3-607-8607
Shirel Guttman Amira firstname.lastname@example.org
Uri Rosenberg urir@ agmon-law.co.il
ABOUT US OUR SERVICES
UK Israel Business is the go-to bilateral
business network, providing our
members with valuable commercial
connections and facilitating investment
in both countries to drive economic
As the Bilateral Chamber of Commerce,
we represent the interests of our
members to key policymakers and utilise
our network of over 2,000 companies
and 10,000 business people to provide
them with the information and contacts
to help their businesses thrive.
Our strength lies in our ability to build
relationships and cultivate a crosssector
view of both the British and Israeli
business communities, to help our
members define their market position
and find the right partners, suppliers or
clients to grow their business. We do this
in three main ways:
Networking: Our networking events
provide a strong marketing platform for
our sponsors and offer unique access to
industry heavyweights, thought leaders
and the chance to make high-level
Support: Working 1:1 with our members,
our umbrella view of both the British
and Israeli ecosystems enables us to
help them understand their business
proposition, offer in-depth market
intelligence reports and gain access
to the right contacts. We assist UK
members planning marketing trips to
Israel with introductions to relevant
Israeli companies; help Israeli companies
operating in the UK acclimatise to the
British business community and facilitate
strategic partnerships between our
Sector-specific activities: The tangible
impact of our work can be seen through
our sector-focussed summits, events
and trade delegations, which provide
investment professionals and large
private companies with an in-depth
overview of the business opportunities
in both countries. Recent summits
have looked at Private Equity, IPOs of
Israeli companies listing on the London
Stock Exchange and Impact Investment
CEO of easyJet, Carolyn McCall OBE
Trade Minister Lord Livingston & Alex Brummer, City Editor, Daily Mail
ivc israel ventu re capital
& Venture Capital
Overview – 2014
The following articles contains excerpts from the full High-Tech and Venture Capital
Research Overview for 2014, first published in the IVC High-Tech 2015 Yearbook
published in April 2015. The full Research Overview is also available as a PDF report file
or a brief presentation from IVC.
Israeli High-Tech Capital Raising
In 2014, Israeli high-tech capital raising set an all-time record as 688 companies
attracted $3.4 billion. The amount was up 46 percent from $2.3 billion raised by 659
companies in 2013, and 88 percent above $1.8 billion invested in 563 companies in
2012. The average company financing round in 2014 was $5.0 million, compared to $3.5
million in 2013 and $3.2 million in 2012.
Chart 1.1: Total Capital Raised by Israeli High-Tech Companies 2005-2014
An analysis of high-tech capital raising by sector shows, 169 Internet companies raised
$941 million in 2014, the most of any sector and 28 percent of the total raised by all
sectors. The amount was exceptionally high for the sector, even surpassing the $927
million registered in 2000. It exceeded 2013’s $515 million raised by 184 companies by
83 percent, and was up almost 150 percent from $382 million raised by 146 Internet
companies in 2012. The average fnancing round was $5.6 million.
The life sciences sector followed as a record high 167 firms attracted $801 million,
which accounted for 24 percent of the total raised. The amount – also a record – was 55
percent above the $516 million (22 percent) raised by 142 life sciences companies in
2013, when the sector led all investments, and 64 percent higher than the $489 million
(27 percent) invested in 133 companies in 2012, when the sector was also the most
popular among investors.
Chart 1.2: Capital Raised by Israeli High-Tech Companies by Sector 2005-2014
Israeli High-Tech Startups: Opened vs. Ceased
High-tech company formations increased 5 percent to 1,000 in 2014. The Internet
sector saw heightened activity with 368 company formations that accounted for 37
percent of total openings. The rise in openings, particularly in the Internet and mobile
application sectors, refects the fact that it is now faster and cheaper to establish new
startups, which have short time-to-market.
After years of a stable ratio between new formations and closings, with two companies
newly formed for every company closed, 2014 saw the ratio move to three companies
established for every closing. This indicates that companies today, in sectors such as
the Internet and mobile apps, have more robust business models and can be easily
sustained while receiving less investment.
Chart 2.1: Newly Established vs. Closed Israeli High-Tech Companies 2010-2014
Israeli High-Tech Exits
This section examines mergers and acquisitions (M&As) and initial public oferings (IPOs)
of Israeli high-tech companies, based on the IVC-Meitar Exits Report.
In 2014, 42 VC-backed exits were valued at $3.1 billion, accounting for 45 percent
of the $6.94 billion from 99 exit deals involving Israeli and Israel-related high-tech
companies. The year 2014 was not as strong as 2013 for VC-backed exits despite more
deals taking place, with proceeds 23 percent lower. Proceeds from 2014 exits were 31
percent higher, however, than the 10-year $2.36 billion average.
Chart 3.4.1: Total Exits vs VC-Backed Exits 2005-2014
Mergers & acquisitions
In 2014, M&A deals involving Israeli and Israel-related companies that were acquired or
merged were valued at $4.84 billion, a 22 percent decrease from $6.23 billion in 2013.
The average M&A deal in 2014 was $59 million, compared to $76 million in 2013. Four
deals exceeded $300 million, with 17 M&A deals worth $100 million or more. Analysis
of M&As by deal size reveals a 45 percent increase in the number of deals ranging from
$100 million to $500 million in 2014. Sixteen such M&A deals accounted for $2.91
billion, compared to 11 deals in 2013 worth $2.57 billion. Five deals ranging between
$50 million and $100 million were valued at $425 million, a 73 percent increase from four
deals in 2013 that totaled $246 million. The number of M&As ranging from $10 million
to $50 million also increased – approximately 13 percent from the previous year.
Changes in deal size appear to be responsible for two contrasting trends. On one hand,
the average M&A deal in 2014 decreased to $59 million from $62 million in 2013 in deals
below $1 billion. On the other hand, in 2014 there was a notable jump in the M&A return
on equity ratio, reaching an average of 6.22 from 4.29 in 2013. The calculation is made
as a ratio between capital from M&A exits and the total capital raised by companies
prior to their exit. The measure relfects the relative value received by company investors
following a company’s exit.
Nine of the 10 largest exit deals in 2014 were acquisitions, accounting for 43 percent
of total proceeds in high- tech exits. The Viber and Check deals, acquired by Rakuten
and Intuit, respectively, accounted for nearly 90 percent of communications exit
proceeds. Te Kontera, Aorato, Cyvera and SuperDerivatives deals accounted for almost
50 percent of IT & enterprise software sector proceeds. In 2014, seven of the 10 largest
acquisitions involved venture-backed frms.
In terms of the number of public offerings, 2014 was the most active year for Israeli
high-tech IPOs since 2007. A total of $2.1 billion was raised by 17 Israeli companies on
NASDAQ, the NYSE, AIM and the London Stock Exchange. MobilEye, the largest IPO of
2014, raised slightly over $1 billion on the NYSE. Each of the remaining 16 IPOs raised
less than $150 million, including the second largest IPO in 2014 which was completed
by SafeCharge on London’s AIM. The year saw a particularly strong return of Israeli hightech
companies to NASDAQ with 11 IPOs completed.
Israeli Venture Capital Fund Raising
The growth of Israel’s venture capital industry is traced to six cycles of fund raising
that peaked in 2000 with $2.9 billion raised, and declined continually through 2003
when only $64 million was raised. In 2014 the Sixth cycle ended on a high note with
$996 million capital raised. In the four cycles since 2000, Israeli venture capital funds
attracted a total of $13.3 billion.
The year 2014 was the most successful year since 2008 in terms of Israeli venture
capital fund raising. Thirteen funds raised $996 million, 45 percent above the $544
million raised by 11 Israeli VC funds in 2013 and 20 percent more than the 10-year
average of $795 million. More medium sized funds and fewer micro VC funds were
raised in 2014 than in the two prior years. The average fund size rose to $77 million, just
short of the $78 million 10-year average.
Five funds raised more than $100 million in 2014: Carmel Ventures’ fourth fund
attracted $194 million. Magma raised $150 million for its fourth fund, which was to
start investing in 2015, less than two years after closing its previous $110 million fund.
Singulariteam, managed by Moshe Hogeg and Kenges Rakishev, raised $102 million for
its second fund. JVP made a first closing of $160 million of a targeted $180 million
for its seventh fund with two components – JVP VII and JVP VII Cyber. In addition,
Vintage’s seventh fund, a fund of funds, attracted $144 million, 50 percent of which is
allocated to Israeli funds. The above five funds accounted for 68 percent of total capital
raised for investments in Israeli companies in 2014. In 2013, Vintage and Aleph each
raised over $100 million and accounted for 57 percent of total capital raised.
Chart 2.1.2: Capital Raised¹ by Israeli VC Funds2 2005-2015(E) by Vintage Year3 & Cycle
Table 3.1: Top 10 Merger & Acquisition Deals Involving Israeli High-Tech Companies 2014
Rotenbe rg & Co.
The primary act of competition legislation in Israel is the Restrictive Trade Practices
Law, 5748-1988 (“RTP Law”). Based primarily on the European model and drawing
inspiration from US antitrust laws, the RTP Law grants the Antitrust Authority
(“Authority”) the powers to monitor restrictive practices, mergers, monopolies,
oligopolistic practices and more; it allows the Director General to impose administrative
fines or prosecute violators in criminal cases; and it also allows for private enforcement
through civil actions.
According to the RTP Law, a monopolist is anyone holding more than half of the total
supply or acquisition of assets or services. The RTP Law imposes stringent norms of
behavior on the monopolist, which include:
(1) A monopolist shall not unreasonably refuse to supply or purchase the asset or
service over which the monopoly exists;
(2) A monopolist shall not abuse his position in the market in a manner that could reduce
competition among businesses or harm the public. A monopolist is deemed to have
abused his market position if he:
(a) Sets unfair prices for the asset or service over which the monopoly exists;
(b) Reduces or increases the quantity of the assets or the scope of the services offered
by the monopolist, not within the context of fair competitive activity;
(c) Establishes different contractual conditions for similar transactions in a manner
which may grant customers or suppliers an unfair advantage vis-à-vis their
(d) Includes unrelated conditions in a contract regarding the asset or service over which
the monopoly exists.
Where there is potential harm to competition or the public, the Director General may
instruct a monopolist to take certain measures to prevent such harm. He may also ask
the Antitrust Tribunal (“Tribunal”) to order the monopolist to sell an asset owned by it.
Recently, the RTP Law, as well as further competition legislation in Israel, has
undergone significant changes aiming to grant the Antitrust Authority and the
Director General unprecedented tools to confront the competitive challenges
arising in the Israeli economy.
The Tribunal may also call for the breakup of a monopoly into two or more distinct
business corporations, if the Director General has found that as a result of its existence
the public is significantly harmed and that such harm cannot efficiently be prevented
through regulating its activity.
The Director General recently proposed to amend the definition of ‘monopolist’ to
encompass any entity which holds market power.
The legislative definition of company mergers includes, but is not limited to, the following:
(1) Acquisition of the main share of the assets of a company by another company;
(2) Acquisition of shares in a company by another company that would give the acquirer
more than a quarter of the nominal value of the issued share capital or of the voting
power, or the power to appoint more than a quarter of the directors or participate
in more than a quarter of the profits.
The merging parties are obliged to make a pre-merger notification of the transaction
and await the Director General’s consent, where one of the following criteria is met:
(1) The merger creates a monopoly market share for the parties to the merger in any
stage of the production chain of the product;
(2) One of the merging parties is (already) a monopoly;
(3) The combined sales turnover of the parties to the merger, in the financial year
preceding the merger, exceeds 150 million NIS, and the sales turnover of at least
two parties to the merger is 10 million NIS each.
Although the RTP Law sets a review period of 30 days, a longer examination period is
sometimes required before the merger is blocked, approved or conditionally approved.
Breaching the reporting duty or the waiting period by the merging parties could lead to
criminal and civil proceedings.
A restrictive arrangement is a trade arrangement entered into by legal entities conducting
business, under which at least one of them restricts itself in a manner liable to eliminate
or reduce the business competition between it and the other parties, or any of them, or
between it and an entity not party to the arrangement.
An arrangement is deemed to be restrictive if it involves one of the following matters:
(1) The price to be demanded, offered or paid;
(2) The profit to be obtained;
(3) The division of the market, according to the location of the business or according to
the persons with whom business is to be conducted;
(4) The quantity, quality or type of assets or services in the business.
The Law prohibits a legal entity from being a party to a restrictive arrangement unless
one of the following conditions prevails:
The Director General recently proposed a reform in the supervision of mergers,
where a general prohibition would apply to mergers where there is reasonable
concern of significant harm to competition. The merging parties would be
redirected to a self-assessment route and if the parties determine there is no
risk of harm to competition, they can execute the merger without applying to
the Director General for approval.
(1) The arrangement has received consent of the Tribunal;
(2) The parties to the arrangement have received the Director General’s exemption
from the requirement to receive the consent of the tribunal;
(3) All the restraints in the arrangement shelter under one of the block exemptions
issued by the Director General, such as exclusive distribution, sole acquisition,
franchise agreements and more.
The RTP Law also specifies a list of arrangements that are not considered restrictive.
For example, an arrangement in which all restraints relate to the rights of use of a patent,
design, trademark, copyright, performers’ rights or developers’ rights, provided that two
conditions are met: (a) The arrangement is entered into by the proprietor of the asset
and the party receiving the right to use it; (b) If the asset is subject to registration by
law – it is so registered.
In general, the RTP Law is applied to arrangements that significantly affect the market in
Israel. It should be noted that its provisions also apply to arrangements made between
two foreign entities, where such an arrangement may have a significant effect on the
market in Israel.
An amendment to the RTP Law in 2011 provided the Director General with
unprecedented power to meet the challenges of oligopolistic markets.
The amendment allows the Director General to determine that a limited group of
entities conducting business and owning more than half of the total supply of an asset
or provision of a service constitutes a “Concentration Group”, where the following two
conditions are met:
(1) Among the members of the group or in the sector in which they operate there is
limited competition, or there exist conditions for limited competition;
(2) Taking certain measures may prevent harm or a risk of significant harm to the public
or to business competition, or could significantly increase the competition or create
conditions for significant increase in competition.
The Director General is also authorized to apply to the Tribunal to instruct a member
of a Concentration Group to sell its holdings in other parties in the group. A recent
amendment also allows the Director General to apply to the Tribunal to instruct a member
of a Concentration Group to sell an asset, if such sale may prevent damage, or eliminate
a risk of significant damage, to the public or to competition, or may significantly increase
competition in the sector.
First use of these powers was made in 2013, when the Director General determined that
two Sea Port companies in Israel constitute a concentration group. The Director General
instructed both companies, inter alia, not to expand their operations to additional port
platforms in Israel.
Having determined that a concentration group exists, the Director General is
empowered to remove entry barriers within the sector or switch barriers; to
terminate a particular activity of a group member if it facilitates coordination
between group members; and many other steps.
Israel’s system of competition law also includes certain sector-specific laws aimed at
reducing economy-wide concentration and promoting competition in specific sectors,
(1) The Law for the Promotion of Competition and Reduction in Concentration (5774-
2013) requires government ministries to consider "concentration levels" and to
consult the Concentration Committee when they allocate public assets or grant
rights (e.g., licenses, contracts and more) to "concentrating entities".
(2) The Law for the Promotion of Competition in the Food Sector (5775-2014) was
enacted with the intention of increasing competition in food and consumer goods
and reducing consumer prices. The law regulates commercial conduct between
suppliers of food and consumer goods and retailers (e.g. shelf allocation).
Market Research - The Authority also functions as an adviser to government
ministries on competition matters. A recent amendment allows the Director
General to carry out market research of the competition level in diverse sectors
in the economy and provide his conclusions and recommendations to the
Minister responsible for the relevant sector.
Rotenberg & Co.
Amir Vang, Head of the
Ron Gazit, Rotenberg & Co. Law Offices (“RGR”) is a mid-sized commercial law firm, composed of 24 lawyers who have
unparalleled experience and provide a full scope of legal services in various legal fields, such as corporate law, antitrust
law, intellectual property, employment law, privacy law, commercial litigation, environmental law, IT and E-Commerce, real
estate and more.
RGR’s antitrust practice (recommended by Legal 500 EMEA 2011-2015; Israeli Dun's 100, 2013-2015; BDIcode 2014-
2015 and more) is involved in the highest-profile matters in antitrust law in Israel, such as the proceedings involving
the copyright collection societies for authors and record companies, credit-card arrangements, telecommunications
termination charges, oligopolistic and monopolistic practices, concertation groups and supply and retail practices in the
food retail sector.
The practice handled numerous class actions related to such matters as abuse of dominance in various industries and
regularly appears before the Israel Antitrust Authority, the Antitrust Tribunal and the Supreme Court on these and other
competition law issues. Additionally, the practice has handled inquiries into abusive or other anti-competitive conduct
and cartel and other concerted practices; assisted its clients in handling on-site document inspections and defended
firms and individuals in competition investigations initiated by the Israel Antitrust Authority.
Also, the Practice has experience in private enforcement – both in complaining to the Israel Antitrust Authority and in
initiating proceedings against anti-competitive behavior; In preparing and implementing compliance programs; In setting
up and representing trade associations on a range of issues, such as preparation of by-laws, obtaining clearances from
the Antitrust Authority and more.
Amir’s practice concentrates on antitrust, IT, telecom, media, and regulation. Amir assists local and international clients
on antitrust compliance, merger proceedings and more. He has led the legal team in many high-profile cases before the
Israeli Courts and in hearings and proceedings before the Antitrust Authority, the Knesset, the Bank of Israel and various
office: + 972-3-711-1707
Amir Vang email@example.com
UK ISRAEL BUSINESS
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
Introductions & market access
• We provide regular in-bound and out-bound introductions for
• 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
• 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
firstname.lastname@example.org or call +44 20 3510 0002
Amit, Pollak, Matalon & Co.
Over the past few years, there has been accelerated activity in the Israeli investment
funds arena. A mix of low interest rates, a bigger pool of institutional funds ready to
be deployed, and a surge in Israeli entrepreneurship and creativity, have combined to
produce such a vibrant market.
While the evolution of the Israeli investment funds sector has been challenging after a
few difficult years for fundraising, we are now witnessing far-reaching changes in the
funds' management teams, investment strategies and structures.
Having learned tough lessons from previous decisions, investors have come back to the
negotiation table with renewed vigor and a more discerning eye, more selective about
management teams and investment opportunities and more demanding with respect
to governance and transparency issues. Against this backdrop of heightened investor
standards, fund management teams have aimed higher by building stronger and more
diverse teams that seek innovative ways to add value to their portfolio companies,
drawing on the sophistication and operational experience of their counterparts. Wellassembled
teams that demonstrate a real prospect to create value, manage to gain
the trust of private, institutional, and also non-Israeli investors. Indeed, over the past
two years there has been a marked increase in the number of Israeli first time funds as
well as funds that are “over-subscribed”.
The impact of low interest rates and current market conditions also drives fund
managers to formulate innovative investment scopes and strategies in various sectors,
both inside and outside Israel. Institutional investors, traditionally more conservative,
are eager to explore these opportunities, in their search for excess returns. This
produces a dramatic growth in innovative investment strategies and structures and
in increasingly various jurisdictions (such as US, Europe and Asia). Indeed, as Israeli
fund managers begin to move beyond their own borders and to pursue market
opportunities abroad, Israel is expanding beyond its position as a world-class hotbed
of technological entrepreneurship and innovation.
Increased investments in venture capital funds
Israel has also seen other major effects and trends including increased investments
in venture capital (“VC”) funds. Israeli VC funds collectively raised almost $1 billion in
2014 – more than had been raised in any year since the 2008 economic downturn, and
approximately 1.5 times more than the amount raised in 2013. More than $600 million
has already been raised in the first half of 2015.
In addition to the increase in the aggregate amounts invested into VC funds, there has
also been an increase in the number of funds raised, a drop in the number of “micro
funds” in favour of slightly larger funds, an increase in the average fund size, and a
fair presence of first time funds and teams. These metrics strongly point to a recent
strengthening of the Israeli venture capital industry, as compared with previous years.
Increased Israeli institutional investor involvement in VC funds
After years of minimal or no investment in VC funds, we have witnessed rising interest
and involvement by Israeli institutional investors in these types of investments over
the past two years. This includes investments by smaller institutional players that were
not previously active in the field, as well as more investments by Israeli institutional
investors in first time funds, to such an extent that there are first time funds in which
Israeli institutional investors contribute the majority of the capital. On top of this, the
actual size of individual investments has grown dramatically.
A significant increase in the presence of Chinese investors
After years in which US investors dominated the Israeli VC investment fund landscape,
recently Chinese investors have also demonstrated enormous interest in Israel, and
have invested considerable sums in Israeli funds and also directly in Israeli companies.
Such investments serve a critical strategic role for Chinese investors keen on gaining
a competitive advantage through technological innovation, and function as a gateway
and important avenue for potential commercial cooperation, R&D and acquisitions.
In a number of recently formed VC funds, interests held by Chinese investors have
reached as high as 30 or even 40 percent.
Greater funding for, and more types of, private equity funds
For years, Israeli VC funds typically raised more capital, and were able to stir more
interest among foreign investors than Israeli private equity (“PE”) funds. With time, as
successful management teams have emerged, the average size of Israeli PE funds has
increased, more management teams have been established, and investment scopes
have multiplied. Today, there are Israeli buyout funds, infrastructure funds, secondary
funds, funds of funds, various types of debt, real estate and agricultural funds across
the globe, as well as other types of funds that defy easy categorization. In 2014, Israeli
PE funds raised a total of $1.7 billion, which represents a 2.5-fold increase from the
amount raised only a year before, and in the first half of 2015 alone, $1.3 billion has
already been raised. With many PE funds planning to raise money in the near future, we
expect significant funds to flow into the industry.
Increased private debt fund activity
A severe shortage of available credit has cast these types of investment opportunities
in the spotlight. The State of Israel recently issued a bid to encourage the establishment
of private debt funds focused on small and medium-sized businesses. As part of the
incentive program, the State will invest in the fund and also mitigate some of the risk
of certain other investors. This program is the latest in a line of incentive programs
for funds, the first and best known of which was the Yozma (initiative) program of the
1990s, which is considered to be the wellspring of the Israeli venture capital industry.
To the best of our knowledge, today there are more than ten groups participating in
the bidding process, and more than five groups that are raising money for private debt
funds outside the scope of the tender. This is by all accounts the hottest field of the
year in terms of PE fundraising.
More investor-friendly terms
In recent years, there has been stronger insistence, especially from Israeli institutional
investors, on more investor-friendly terms and conditions. This has resulted in lower
management fees and carried interest, increased transparency and reporting, and
other arrangements designed to address conflicts of interest and better align the
interests of General Partners and investors.
Evolution in tax treatment
Generally, Israeli PE and VC funds may obtain a tax ruling from the Israeli Tax Authority
of the Israeli Ministry of Finance. Such a tax ruling would typically provide either a tax
reduction or a full exemption from tax on gains derived by non-Israeli investors from
the funds' investments in Israeli and Israeli-related companies. In order to qualify for
the benefits of such a ruling, a fund would be required to meet certain requirements,
relating generally to the composition of its investors, the manner in which it invests
and the types of investments it makes. Those conditions are generally consistent
with the manner in which "standard" Israeli funds investing in Israel typically operate.
Such tax rulings typically also address the taxation of carried interest by the general
partner, and a separate value added tax ruling may provide that VAT at a rate of zero
would apply to management fees and possibly also carried interest, with respect to
the proportional share attributable to non-Israeli investors. The terms of the tax and
VAT rulings continuously evolve throughout the years, but a more detailed discussion
of the trends is beyond the scope of this article.
Shifting regulatory environment
The European Alternative Investment Fund Managers Directive (AIFMD) regulations
and the regulations promulgated under the U.S. Dodd-Frank Wall Street Reform
and Consumer Protection Act, that preceded it, marked a trend of strengthening
regulatory oversight over private fund managers.
These regulations impose various registration requirements and stipulations on funds
interested in soliciting European or American investors, and on the use of finders
who are not registered broker dealers by funds soliciting American investors (and
by American funds soliciting investors anywhere in the world). These regulations not
only serve as a challenge for Israeli fund managers keen on soliciting European and
American investors with ease, but also serve as a contrast to the relatively simple
Israeli regulatory environment. The Israeli Securities Law, 1968 which regulates the
offer of securities to the public in Israel, and the Law of Investment Advice, Investment
Marketing and Investment Portfolio Management, 1995, which regulates the provision
of investment counseling, marketing and portfolio management services in Israel,
generally provide that no additional registration of the offering, or registration of the
fund manager as an investment advisor is required, if the fund meets the relevant
limitations with respect to conducting a private offering and, where needed, only
offers interests to "qualified clients".
The speed at which significant changes in the global marketplace are currently taking
place is unprecedented, and perhaps the most pronounced trend of all – its impact
manifesting itself in the shifting dynamic between management teams and investors,
the evolution of investment terms and strategies, and in the tax and regulatory arena.
In this ever-changing environment, a dynamic and comprehensive perspective is key
to navigating these challenges.
APM & Co.
Yonatan Altman, Chairman and Head of the
Hi-Tech and Venture Capital Department
Maya Issacharov, Partner, Fund Formation
APM & Co. is a renowned Israeli law firm with a robust legal practice. Established in 1956, the firm draws on six decades
of excellence to offer an up-to-date and innovative approach to the practice of law. The firm provides a comprehensive
range of legal services to an Israeli and International client base that spans across all business sectors.
APM & Co.'s main areas of expertise are corporate law, mergers and acquisitions, capital markets and securities, hightech,
fund formation, intellectual property, international and local taxation, finance, anti-trust, bankruptcy, liquidation and
reorganization, real estate, labor law, projects and energy, regulatory and compliance, environmental law and litigation.
APM & Co. is consistently ranked by leading international and local directories of the legal profession, such as Chambers
& Partners, Legal500 EMEA, Dun's 100 and BdiCode.
APM & Co.'s high-tech and venture capital practice is one of the most prominent and dynamic practices in Israel.
APM & Co. represents entrepreneurs, startups, technology companies, angel investors, accelerators, institutional
investors, technological incubators and private equity and venture capital funds, both domestic and foreign. The firm
has extensive experience in all types of high-tech and venture capital transactions including, investments (all stages),
securities offerings, mergers and acquisitions, joint ventures, IP licensing transactions and multilateral international
agreements. APM & Co. offers particular value to entrepreneurs and startups seeking counsel on formation, founders'
agreements, fundraising and structuring of business models. Time and again, APM & Co. has supported ongoing client
activities, investment rounds and business expansion up through multi-million dollar exit transactions.
APM & Co. is considered as a market leader in the fund formation practice and has formed many of the leading venture
capital and private equity funds operating in Israel today, such as Vintage, Fortissimo and Genesis Partners. APM & Co.'s
in-depth knowledge of the market enables the firm to be instrumental in representing newly established funds and fund
managers, in ever changing fundraising environments.
Drawing on the vast experience accumulated through its longstanding presence in the high-tech ecosystem, APM &
Co. couples legal services of the highest standard with sound business judgment to offer first-rate representation that
makes a difference.
office: + 972-3-568-9000
Yonatan Altman email@example.com
Maya Issacharov firstname.lastname@example.org
PwC Israel is a leading professional services firm for the Israeli hi-tech industry. The vast experience
we have accumulated and our leading position in this industry give us deep understanding of the
unique business needs of hi-tech companies and allow us to offer superior innovative solutions.
PwC Israel is a one-stop-shop for a wide spectrum of services for companies in all development
stages, from startups to large multi-nationals. We help our clients as they grow from initial
incorporation, through IPOs and/or M&As and beyond, using our extensive network of ties and
our long-standing experience.
Our thought leadership for the industry includes publishing the Annual Exit Report, which reviews
exits by Israeli tech companies during the previous year. We also publish our local edition of the
quarterly MoneyTree™, which complements the reports in the US and Europe published by the
PwC global network. The report gives a reading on venture capital investments in Israeli hi-tech.
PwC Israel High Tech
Our Startup Program
We, at PwC Israel, believe that the future of Israeli hi-tech mostly depends on the collective spirit and innovation that
comes from thousands of entrepreneurs. We know how difficult and complicated it is for entrepreneurs when taking
their first steps, and that they can use all the help they can get to allow them to focus on the one most important thing
– building a successful company.
PwC Israel's Startup Program enables entrepreneurs to do just that.
Our hi-tech teams are dedicated and trained to support founders and their startups in taking those crucial first steps
by providing a whole suite of services, including assistance in raising initial capital and other critical support to make
their lives simpler.
Our experience with giving personal attention to hundreds of local startups allow the entrepreneur get highly focused,
clear and personalized advice on business, accounting, tax and other issues that are customized for startups.
compliance needs while adding value throughout the cycle.
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"PwC Israel" refers to Kesselman & Kesselman, or, as the context requires, PricewaterhouseCoopers Advisory Ltd., Kesselman & Kesselman PwC Trust Company (1971) Ltd. or Kesselman PwC Nominees and
Trustees 1988 Ltd., which are member firms of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
PwC Israel helps organisations and individuals create the value they’re looking for. We’re a member of the PwC network of firms in 157 countries with more than 195,000 people who are committed to delivering
quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/il.
For more information please contact:
Rubi Suliman, Partner
Guy Preminger, Partner
Head of Technology
Head of Hi-Tech Business Development
Manager, Hi-Tech Business Development
Office: +972-3-795 4572
Taxes on corporate income
Israel-incorporated companies and foreign companies that have a branch presence
in Israel are both subject to Israeli corporate tax. An Israeli-resident entity is subject
to Israeli corporate tax on worldwide income while a non-resident entity is subject to
Israeli corporate tax only on income accrued or derived in Israel. Income sourcing rules
determine when income is to be considered from an Israeli source.
The corporate tax rate is 26.5%. A legislation process is in place which, if approved, will
reduce the tax rate to 25% beginning on January 1, 2016.
A branch is liable for tax at the standard corporate rate on Israel-source income. No
tax is withheld on transfers of profits to the foreign head office unless the branch is
taxed under a reduced tax regime.
Entities that are entitled to incentives under the Law for Encouragement of Capital
Investments (“the Encouragement Law”) are subject to reduced rates of tax depending
upon the level of foreign ownership and location.
The tax year is generally the calendar year ended December 31. Certain entities
may apply to have their tax year-end on different dates, specifically, mutual funds,
government companies, quoted companies, and subsidiaries of foreign publicly listed
companies with a different year end.
The Israeli system is based on a combined form of assessment and self-assessment.
The statutory filing date is five months following the end of the tax year, which for a
calendar year taxpayer would be 31 May. It is possible, however, to secure extensions
of the filing date.
Every company regardless of its size must file an annual tax return. The tax return
must be audited by an audit firm and accompanied by an audit opinion and audited
statutory financial statements.
Payment of tax
Generally, 12 monthly advance payments are levied at a fixed ratio of the company’s
turnover. Alternatively, a company may be required to make ten monthly payments
beginning in the second month of its tax year, each payment being a fixed percentage
of the previous year’s tax assessment.
Penalties are imposed on overdue advance payments and on delays in the submission
of tax returns. The balance of any taxes due is payable from the beginning of the
following tax year and is linked to the CPI; it bears interest of 4% until paid.
Tax audit process
A tax return, once filed, constitutes a self-assessment that remains open to review
by the ITA for three years from the end of the tax year in which the tax return is filed
(within four years after the end of the said tax year with the Commissioner’s approval).
If no return is filed and a tax officer believes a taxpayer owes tax, the tax officer may
issue a ‘best judgement’ assessment without time limit.
Statute of limitations
The statute of limitation period for corporate tax is three years from the end of the
tax year in which the relevant tax return is filed. The Commissioner of the ITA has the
authority to extend this period to four years.
Topics of focus for tax authorities
Some key tax issues that the ITA has focused on recently include:
• Transfer pricing.
• Treaty shopping to reduce WHT and capital gains tax.
• WHT on payments to overseas service providers and for payments in regard to
The following are considered to be resident in Israel:
• A company incorporated in Israel.
• A company whose business is managed and controlled from Israel.
In the absence of a definition of the term ‘management and control’ either in Israeli
legislation or a direct discussion of this term by the Israeli courts, it may be difficult to
determine whether a company that is incorporated outside of Israel shall be viewed
as managed and controlled from Israel. This is a complex subject that needs to be
addressed on a case-by-case basis. When an entity is both an Israeli tax resident and
a resident of a foreign jurisdiction that is party to an income tax treaty with Israel, most
treaties provide a tiebreaker test in the determination of an entity’s tax residency.
Permanent establishment (PE)
Foreign resident entities might be exempt from corporate tax to the extent that its
activities do not constitute a PE under the tax treaty applicable between Israel and
the foreign resident’s country of residency.
Whether a non-resident has a taxable presence under Israeli domestic tax law is far
less clear than the definition of PE under a relevant tax treaty. There is no detailed
legislation or Israeli court decisions that directly address this issue. In general, where
there is no tax treaty protection, a non-resident is subject to tax on income accrued or
derived in Israel, which is a taxation threshold lower than the PE criterion.
In general, the annual results (i.e. the excess of income over expenses or vice versa) of
an Israeli company or branch, as detailed in the taxpayer’s audited financial statements,
form the basis for computing the taxable income of the business.
The base amount is then adjusted pursuant to the provisions of the tax law to arrive
at ‘taxable income’.
Received by an Israeli-resident company
Dividends received by an Israeli-resident company from another Israeli-resident
company that originate from income accrued or derived in Israel are exempt from
corporate tax, except for dividends paid from income taxed under a reduced tax
regime. This affords the opportunity to transfer after tax profits within an Israeli group
of companies for further investment.
Dividends received by an Israeli-resident company from a non-resident company,
as well as dividends received from an Israeli company that arise from foreign-source
income of the distributing company, are generally taxable for the receiving company
at the rate of 26.5%. Under certain circumstances, the receiving company may elect
to be taxed on such dividends at the corporate tax rate, in which case it will also be
entitled to a foreign tax credit with respect to corporate taxes paid by the company
distributing the dividend (i.e. an ‘underlying’ tax credit).
Received by a non-resident shareholder
Dividends received by a non-resident shareholder from an Israeli company are generally
subject to tax at the rate of 25% (30% if paid to a 10% or more shareholder), subject
to a reduced rate of tax under an applicable tax treaty.
Several of Israel’s tax treaties have very beneficial withholding tax (WHT) rates for
dividends being paid from Israel. The ITA is very sensitive to treaty shopping, and it will
be necessary to demonstrate to the ITA that the foreign holding entity has business
substance in its country of residence that will support its residency for treaty purposes
and that the structuring of the holding through that entity was not implemented for
tax treaty benefit purposes. Furthermore, many of the treaties contain a beneficial
ownership clause as a condition to enjoying the treaty WHT rates.
Received by an Israeli-resident company
Interest income received by an Israeli-resident company is subject to the regular
corporate tax rate.
Received by a non-resident
Interest income received by a non-resident company is generally subject to tax at the
corporate tax rate or subject to a reduced rate of tax under an applicable tax treaty.
Interest received by a non-resident from deposits of foreign currency with an Israeli
bank is exempt from tax, subject to certain conditions.
Rent and royalty income, less allowable deductions for tax purposes, is subject to tax
at the regular corporate tax rate.
From an Israeli tax perspective, a partnership is, in principle, a fiscally transparent
vehicle. Accordingly, Israeli tax law does not tax partnerships as such; however,
generally, each partner is taxed in respect of its share of the partnership income, with
the taxable income allocated to a corporate partner taxed at the regular company
tax rate. Consequently, the actual distribution of partnership income to a partner is a
An Israeli-resident company is liable for tax on its worldwide income. Double taxation
is avoided by way of a foreign tax credit mechanism that also applies unilaterally in the
absence of an applicable double taxation treaty (DTT).
Under the controlled foreign company (CFC) regime in Israeli tax law, an Israeli
company or individual may be taxed on a proportion of the undistributed profits of
certain Israeli-controlled non-resident companies in which the Israeli shareholder has
a controlling interest (10% or more of any of the CFC’s ‘means of control’).
Value-added tax (VAT)
As of October 1 2015, the VAT rate is 17%
Exports of goods and certain services and various other transactions are zero-rated,
and certain transactions are exempt. Banks and other financial institutions pay VATequivalent
taxes at the rate of based on their total payroll and on profits. Not-forprofit
organizations pay VAT-equivalent tax (wage tax) at the rate of 7.5% of their
Customs duty is imposed on certain products imported into Israel. The rates of duty
depend upon their classification according to the Harmonised Customs Tariff and the
country of origin. Israel has concluded free-trade agreements with the United States,
Canada, Mexico, the European Union (EU), and the European Free Trade Association
The government imposes excise taxes on a variety of goods (e.g. fuel, tobacco). The
excise taxes are levied item-by-item.
Municipal tax is levied annually on buildings by local municipalities based on the size,
location, and purpose of the property.
The purchaser of real estate is generally subject to acquisition tax at rates up to
a maximum of 10% (the highest rate applies when the purchase price exceeds
approximately 15.5 million Israeli shekels [ILS]).
There are no stamp taxes imposed in Israel.
Eitan Glazer, Audit Partner
Energy & Cleantech Practice leader
Established in 1924, PwC Israel helps organizations and individuals create the value they’re looking for. We are a member
of the PwC network of firms with 169,000 people in more than 158 countries. The firm currently has 60 partners and
about 1,200 professionals. Headquartered in Tel Aviv, we have branches in Haifa, Jerusalem and Omer.
Our clients operate in all sectors of the Israeli economy. They range from start-ups to large multinationals. We help them
to obtain their goals, from inception to IPO or M&A, using our industry-wide expertise and relationships. We can tap into
the know-how, global reach and resources of the entire PwC network, allowing us to support clients in resolving complex
business issues, managing processes and risks and improving performance both in Israel and worldwide.
We offer three main lines of services:
Assurance and financial reporting
Our assurance services are tailored to the industry and specific business of each client, based on a standardized audit
methodology used by PwC firms worldwide. Our audit teams adjust their work to the audit environment of each client to
ensure efficiency and quality. Whenever needed, we use multinational audit teams, which combine assurance practitioners
from different PwC firms.
Our tax practice is one of the few in Israel offering a complete suite of Israeli and international tax services, providing a
one-stop shop solution.
We provide a whole array of services through specialized teams: corporate, international, US, property, individual and
indirect tax. We also have a dedicated team providing services related to the ITA's automated reporting systems (Sha'am).
Our advisory group supports leading companies through multidisciplinary teams with rich experiences and global
knowledge, and provides the tools needed to make informed decisions. Services span M&A transaction support
(transaction services), economic advisory, risk management and actuary, IT, internal audit and SOX, and corporate
governance and ethics, including executive compensation plans, government incentives, forensics and trusteeship.
office: + 972-3-795-4830
Eitan Glazer email@example.com
SETTING THE BENCHMARK
THE FIRST STEP FOR INTERNATIONAL LAW
FIRMS DOING BUSINESS IN ISRAEL
Tadmor & Co. Yuval
Levy & Co.
to the Israeli
Since its establishment, and until the last decade, Israel’s energy market was
characterized by scarcity and disparity; increasing consumption; and limited
competition. No large marketable energy sources were at hand and the country’s
primary energy sources were imported fossil fuels. In addition, electricity generation,
transmission and distribution were undertaken solely by Israel Electricity Company
Ltd. (“IEC”), a government-owned integrated monopoly. However, in the last decade
the energy market in Israel has changed profoundly.
Firstly, in 1996 the legislature enacted the Electricity Sector Law, 5756-1996 (the
“Electricity Law”), which introduced various structural changes, and transformed the
Israeli electricity sector from a concession-based sector to a license-based sector.
Such legal framework has enabled independent power producers (“IPPs”), for the first
time in Israel’s history, to own and operate large-scale conventional, solar and pump
storage hydroelectricity facilities.
Secondly, following recent discoveries of offshore natural gas such as the “Tamar”
field (11 TCF), which began commercial production in 2013, and the “Karish” field (1.8
TCF), the “Tanin” field (1.2 TCF) and the “Leviathan” field (22 TCF), which are expected
to be operational within a few years, Israel’s natural gas demand will now be met by
local production and Israel will become an exporter of natural gas.
In addition, Israel’s complex relations with its neighbors rendered it an “energy island”
such that electricity is entirely generated domestically with no grid connections
with any neighboring economies. Therefore, and as described below, the Israeli
energy market is very much under development with diverse capital investment and
Legal and regulatory framework
The Israeli electricity sector is dominated by IEC, which was historically granted with a
concession to generate, transmit and distribute electric power in Israel. In 1996, with
the enactment of the Electricity Law, it was decided to open the electricity sector to
Despite these discoveries, Israel still faces significant challenges as the holders
of the gas licenses require the support of prominent international oil and gas
companies in developing the reservoirs and the necessary infrastructure in order
to link them to Israel’s distribution network.
competition and to reorganize that each activity thereunder is governed by a license.
In the interim and until the reforms are fully implemented, IEC was provided with a
provisional authorization to continue to perform its various functions, which has been
extended several times.
The Ministry of National Infrastructures, Energy and Water Resources (the “Ministry”)
and the Public Utilities Authority – Electricity (the “PUA”) are the regulatory bodies
that oversee the electricity sector. The Minister of National Infrastructures, Energy
and Water Resources is vested with certain authority with respect to the issuance,
extension and revocation of licenses; approval of changes in control in license holders;
and approval of pledging or granting security interests of and over license assets.
In general, the Electricity Law and the regulations promulgated thereunder specify
the conditions for obtaining a provisional license to produce electricity, which after
fulfilling certain milestones, is replaced by a permanent license (usually for a period of
20 years), which is required in order to carry out the commercial operation of the IPP.
The PUA was established in 1996 as an administrative entity that determines tariffs,
as well as setting out, and supervising the fulfillment of, the criteria established for
the standard, nature and quality of the services provided in the electricity sector.
In general, tariffs in Israel are a function of the type/technology of the IPP and in
some instances also its capacity. Once published, the tariffs are in effect until a predetermined
quota is attained or a certain time period has elapsed. Depending on the
type/technology of the IPP, the regulatory regime provides for a safety net, according
to which such IPP may sell all or a certain percentage of its output to the holder of a
system management license (currently the IEC).
The Electricity Law has laid down the legal framework which allowed the Ministry
of Finance and the Ministry to tackle electricity shortage and to elevate renewable
energy through private-public-partnerships (“PPP”). Although at this stage it is clear
that such goal is not feasible by 2020, the Israeli Government is keen to make sure the
goal is attained thereafter.
Oil & Gas
The oil and gas sector in Israel is governed by two primary laws: the Petroleum Law,
5712-1952 (the “Petroleum Law”) and the Natural Gas Sector Law, 5762-2002 (the
“Gas Law”). The Petroleum Law governs and regulates Israeli upstream activities
with respect to exploration and production of oil and gas. The Gas Law governs the
midstream and downstream activities and sets out a licensing regime for natural gas
infrastructure, which is regulated by the Natural Gas Authority.
The Petroleum Law grants vast powers to the petroleum commissioner (the
“Commissioner”) who is primary responsible for regulating all upstream oil and gas
activities, as well as reviewing and approving transfer or pledging of rights granted
under the Petroleum Law. There are three main rights that may be granted by the
Commissioner under the Petroleum Law: a preliminary permit, a license and a lease.
A preliminary permit confers the right to carry out preliminary testing investigations
(excluding test drilling). A license grants the right to explore for petroleum in the
license area and outside such area in certain circumstances; the exclusive right to
These initiatives along with several governmental decisions have facilitated
the development of large-scale projects with minimum immediate reliance on
allocations from the national budget.
conduct test or development drilling in the license area; and to produce petroleum.
Once the Commissioner recognizes that a discovery has been made, the licensee may
be granted a lease for 30 years which can be extended to 50 years.
The Petroleum Law establishes that a leaseholder is allowed in principle to export
petroleum. In 2013, pursuant to the recommendation of the “Zemach Committee,”
the Israeli Government adopted a resolution which limits natural gas exports to
approximately 40% of production (with the exception of reservoirs in existence prior
to the adoption of this policy, which may export up to 50% of production).
There are two key components of taxation relevant to the oil and gas industry. The
first component relates to the royalties that a holder of a lease must pay to the Israeli
Government in an amount equal to 12.5% of the wellhead value of the petroleum
produced from the leased area. The second component, introduced following the
recommendations of the “Sheshinski Committee,” is a levy imposed on profits derived
from the sale of petroleum pursuant to the Petroleum Profit Taxation Law, 5771-
2011. The levy applies only to profits from upstream operations and is designed to
capitalize on the economic dividend arising from each petroleum reservoir only after
the holder of a lease achieves a full return on its investment plus an additional return
for some of the financial risks.
The current energy mix and future developments
Natural gas is expected to play a considerable role in Israel’s future energy mix and
recent discoveries have already significantly reduced the use of coal as the main
source of Israeli electric power. Israel does not produce nuclear energy and currently
less than 5% of the energy mix is derived from renewable sources.
The Draft still requires the approval of the Israeli parliament unless the Minister of
the Economy decides to use his authority pursuant to the Restrictive Trade Practices
Law, 5748-1988 and exempt the Draft from antitrust constraints. The Draft is the
outcome of a recent dispute between the Director-General of the Antitrust Authority
(the “Director-General”) and the partners in the Leviathan and Tamar fields. The
Director-General has reconsidered the applicability of a previous arrangement that
would have allowed the partners to retain their stakes in the fields as long as they sold
their shares in the Karish and Tanin fields.
Therefore, we identify several capital investment and acquisition opportunities. First,
following the approval of the Draft, the partners in the Leviathan and Tamar fields will
be required to sell their stakes in the Karish and Tanin fields. Second, in order to access
distant markets Israel will need to facilitate the construction of a liquid natural gas
(“LNG”) facility. Other than development, construction and operation of an LNG facility,
the local market will require: additional gas-supporting and export infrastructure;
companies with the expertise to convert existing power plants to natural-gas
compatible or build new power plants; companies with expertise in pollution controls;
and other services which relate to the industrial application of natural gas. In the long
run, investment opportunities may relate to the development of a methanol plant or to
companies capable of introducing natural gas vehicles. In addition, several gas-related
PPP projects have already been published such as a tender for the construction of a
large scale ammonia production plant in the Negev region.
The most recent regulatory hurdle facing the energy market is the approval of
the draft “gas outline agreement” recently published by the Israeli Government
Tadmor & Co. Yuval
Levy & Co.
Jonathan Finklestone, Senior Partner,
Head of Project Finance Practice Group
Tadmor & Co. Yuval Levy & Co. is a premier Israeli law firm with a global perspective dedicated to providing effective and
sophisticated legal services to clients operating in all sectors of the economy. The firm’s comprehensive international and
local experience allows it to serve as a two-way gateway for its clients: taking its Israeli clients worldwide, while closely
supporting its foreign clients in Israel. The firm is consistently ranked among Israel’s elite law firms in various legal publications
and directories, including Chambers Global, Legal500, Global Competition Review, Who’s Who Legal and IFLR1000.
Being one of the premier single designated projects and energy practice groups in Israel, the firm's Project Finance
practice group has an in-depth understanding of the broad spectrum of issues that relate to the regulatory framework
for, and financing of, energy and natural resources; and has assumed a key role in supporting banks, institutional investors
and sponsors in developing pathfinder and innovative financing structures.
Among the firm's notable transactions in the energy sector in the past twelve months are:
• Representation of a project company in procuring financing for the design, construction and operation of a 121MW
Solar Energy Thermal Power Station in Ashalim, Israel. The project utilizes unique and ground breaking “Tower
Technology”, similar to that used at the Ivanpah project in Southern California, USA and was recently awarded as the
European Solar Power Project of 2015 by IJGlobal;
• Representation of a project company in the development of 834MW natural gas fired power plant in the south of
Israel. This is the largest privately owned power station in Israel;
• Representation of the lenders financing a 300MW hydroelectricity pumped-storage power plant in Ma’ale Gilboa,
Israel. This is the first hydro-electric project in Israel.
Jonathan's practice covers a wide range of project and infrastructure financings in various project structures and delivery
systems. His transactional work has been recognized by numerous ranking guides, including Chambers Global, Legal500,
Who’s Who Legal, and IFLR1000 where he is listed as a Tier 1 practitioner in Israel Projects & Energy. Clients characterize
him as an “amazing lawyer” with “excellent deal-making abilities” and “vast local and international experience” and cite
his “commercial attitude” and the fact that he demonstrates “industry knowledge and has excellent connections”. In the
past, Jonathan was a project finance attorney at the New York law offices of Chadbourne and Parke LLP.
Guy’s focus is on project development, public-private partnerships and other project financing transactions, primarily
in the water and power sectors. He regularly represents sponsors, banks and financial institutions in the development,
financing, acquisition and disposition of infrastructure projects. Guy received his LL.M. degree focusing on energy and
climate change law from Columbia University School of Law, where he was named a Harlan Fiske Stone Scholar and a
recipient of the Parker School Recognition of Achievement in International and Comparative Law.
Guy Kles, Senior Associate,
Project Finance Practice Group
office: + 972-3-684-6000
Jonathan Finklestone jonathan@Tadmor-Levy.com
Guy Kles guy@Tadmor-Levy.com
Dr. Ilan Cohn, Daphna Gilat
Reinhold Cohn Group
Reinhold Cohn & Partners,
Gilat, Bareket & Co.,
Attorneys at Law
IP Law in
Intellectual property (IP) is a key driver of the innovation-based Israeli economy. The
IP laws are a combination of such which are a product of the original Israeli legislation
and others that are amended and updated versions of British legislation during the
British mandate over of Palestine (1920-1948).
In respect of counterfeits for example, rights holders can enforce their IP right, with
the availability of expeditious judicial interim relief and the possible assistance of
governmental agencies such as the police and the customs authority.
Patents, designs and plant varieties
The Patents Law, 1967 is an original Israeli statute which incorporates such principles
as the requirement for absolute novelty and has been amended to reflect Israel’s
international obligations such as the Patent Cooperation Treaty. The Patent Law was
amended in 2011 and 2012. One of the recent substantial changes in the Patents Law
was the introduction of early publication of patent applications. A patent application
and its file wrapper will now be open for public inspection after a period of 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 acceptance of the patent application.
On January 2014 the Patents Law was amended again and introduced a significant
reform in the patent term extension (PTE) system.
The Law governing the protection of Industrial Designs in Israel is currently the
Patents and Designs Ordinance of 1924 which is the amended British ordinance that
supports old concepts such as local novelty; however, on July 13, 2015, a new Designs
Bill passed its first reading in the Israeli Parliament. When finally enacted the new
Designs Law will replace the old Ordinance and will modernize the designs protection
in Israel. Some of the major provisions of the Bill are a new definition for a "product"
encompassing graphic symbols and typographic typefaces, international novelty
unregistered designs protection, grace period and provisions for Israel’s accession to
The Hague Agreement .
Rights in new plant varieties are governed by the Plant Breeders Law, 1973.
Although there are no specialized IP courts in Israel, the courts are generally
Trademarks, appellations of origin and trade secrets
The British Trademarks Ordinance, which was introduced in 1938, is the basic Law
governing 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 (introducing legislative protection
for well-known marks). Recent amendments were designed to ensure conformity with the
Madrid Protocol. The British Merchandise Marks Ordinance, which has also been amended,
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 description and other
business-related torts having a bearing on IP litigation.
Israeli law of copyright (including copyright protection of software) is governed by
the Copyright Law, 2007. The provisions of the British Copyright Ordinance of 1924
regulate 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, 5759 – 1999.
The neighboring rights of performers and broadcasters are addressed in the
Performers and Broadcasters Rights Law, 5744 – 1984.
Israel’s IP protection is further shaped by other statutes and regulations relevant to
various specific aspects of IP protection as well as by a constantly evolving body of
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 internet sites that are located outside
of Israel and to disclose the identifying details of infringing users. On the other hand,
we also encounter cases in which the court refused to provide such an order in the
absence of specific legislation. The matter is yet to be decided by the Supreme Court.
Since 2009 the Israeli Patents and Trademarks Office has improved its computerized
systems in line with the requirements of the Madrid system; it is possible to access
the system for search purposes, filings of trademarks, issuance of certificates etc.
Recently the use of the computerized system was extended to cover filings of
oppositions, evidence and other adversary proceedings.
Under a newly signed agreement between the U.S. Patent and Trademark Office
(USPTO) and the Israeli Patent Authority (IPA), as of October 1, 2014, 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.
The Global Patent Prosecution Highway (GPPH) is a new program that came into
effect on January 6, 2014 and is a way to accelerate procedures in one country based
on favorable examination in another. The IPA is one of the 17 participating offices, that
also include the USPTO and others, and, consequently, new accelerated procedures
are now available to applicants of Israeli patent applications. Similarly, success in the
examination of an Israeli application may be used to accelerate prosecution in other
In principle, the Trademarks Ordinance envisages the possibility of registering threedimensional
(3D) trademarks. On March 2015 the IPO issued a new Circular Letter
which sets forth the current policy of IPO on the registration of 3D marks consisting of
the configuration of products or their packaging. Accordingly a 3D shape of a product
or packaging is to be examined like any other mark, in its entirety, and will be eligible for
registration as a trademark in the event that such mark contains additional elements
permitting the identification of the source of the goods, or upon demonstration,
through evidence, of the following three cumulative criteria: The shape of the 3D mark
serves as a trademark; The shape does not have an essentially aesthetic or functional
role; and the shape has acquired a secondary meaning.
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 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 recent practice of the Israeli Patent Office has been relatively conservative in that
methods of doing business, as such, cannot be protected by Patents. With regard
to software-related inventions, the applicable patentability standards are in a state
of uncertainty. Generally speaking, the prospects of getting a patent for a softwarerelated
invention (other than a business method) are similar to those of the European
The Law in 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
importer other than the one appointed by the rights owner (parallel importers) may
import genuine goods into the country. In a recent case 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. Nonetheless, 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.
In conclusion, as can be seen, the various aspects of IP protection in Israel are based
on a variety of laws and case law which have been and continue to be revised and
updated to be 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 ensuring a real and effective priority
to the protection of IP rights.
Reinhold Cohn &
Reinhold Cohn Group is the largest, earliest established and leading intellectual property (IP) firm in Israel offering
premier expertise in filing, prosecution, renewals, protection, oppositions, opinions, due diligence, freedom to operate,
enforcement, litigation, licensing, commercialization and evaluation, portfolio management and strategic counseling in
all areas of intellectual property including patents, trademarks, designs, copyrights, enforcement, open source, plant
breeders' rights, etc.
The Group is a full service IP firm and includes the patent attorney firm Reinhold Cohn & Partners and the law firm Gilat,
Bareket & Co. Reinhold Cohn Group has a staff of about 250, amongst them over 70 are patent attorneys and attorneys
at law. The expertise of the Group's attorneys covers a very wide range of technological and industrial disciplines.
Reinhold Cohn Group takes pride in the diversity of its clients representing many Israeli companies as well as numerous
multi-national corporations in Israel. The Group's clients include Fortune 500 companies, governmental entities, start-up
companies, companies in advanced stages of research and development, private and institutional investors, scientists,
entrepreneurs and inventors.
Reinhold Cohn Group 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, IAM 1000, IAM 300, Who's Who Legal, Expert Guides, BDI, and more.
Ilan holds a Ph.D. in Biology (1988) from the Hebrew University of Jerusalem. He has close to 30 years of experience
in the field of patents and in other spheres of intellectual property;. Ilan gained extensive experience and expertise in
transforming intellectual property assets, particularly patents, into a first tier, value-creating asset.
He is a member of the Board of Directors of several companies and also serves as a member of investment committees of
venture capital funds, technological incubators and accelerators. For several years, Ilan has been personally recommended
in leading international guides, such as Chambers & Partners , MIP IP Stars, IAM Patent 1000 and Expert Guides. Also Ilan
is the only Israeli patent attorney who is ranked in the prestigious IAM300 patent strategists guide.
Daphna holds an LL.B. degree (1989) & CPA (1989), both from Tel Aviv University and is a licensed mediator since 1999.
With over 20 years of extensive experience in the field of intellectual property, Daphna represents and advises prominent
international and Israeli companies, including multinational, industrial and start-up companies, as well as government
institutions, in a variety of matters. Daphna specializes in managing transactions, including licensing and commercial
agreements, transactions related to start-up companies, venture capital, international transactions and additional
commercial agreements related to technology. Daphna has been recognized and commended for several years in the
prestigious IAM Patent 1000 guide.
Dr. Ilan Cohn, Patent Attorney and
Daphna Gilat, CPA, Senior Partner
office: + 972-3-710-9333
Ilan Cohn firstname.lastname@example.org
Daphna Gilat email@example.com
Preis, Baharav & Co.
The Israeli banking and finance sector has been the focal point of regulatory and popular
attention in recent years, following the markets crisis in 2008 as well as local defaulting
debtors with high public exposure.
It is worth pointing out that the credit defaults that drew much public and regulatory
attention had a relatively limited effect on the composition and profitability of the public
savings but the actual influence of the defaults on the regulatory side were significant.
The economic conditions, increasing appetite for risk appetite and regulatory
inconsistency combine to support a thriving and diverse market, where the balances of
yield and risk change among different types of lenders, and the structure and form of
transactions may be influenced by the regulatory requirements that apply to different
Banking sector participants and competition
Large Borrowers and Loans
In this segment, credits are offered by banks, institutional lenders such as insurance
companies and provident funds, as well as leverage funds and other investment funds
and other lending firms (focusing mostly on short term lending). All of these players
compete with the capital markets, which offer – for suitable borrowers – an opportunity
to raise debt on competitive terms.
The introduction of private lending services by institutional lenders was, unsurprisingly,
not welcomed by the local banks. Banks have rightfully pointed out the inconsistent
regulation, which imposes greater, and more costly, requirements on banks in comparison
to the regulation facing institutional lenders. It is fair to say, that although the regulatory
requirements applicable to institutional lenders have been developing, it has not reached
the level of the regulation imposed on the banks. In addition to the unfairness of this
regulatory inconsistency, it has been implied that it resulted in institutional loans being
inferior in their quality to bank loans. This implication is doubtful. However, it is evident
that private loans, whether originated by banks or by institutional investors, have been
relatively more secured and incurred lower losses than capital markets debt (publicly
For many years, the role of extending credit to businesses has been concentrated
in the local banking sector. Although this remains true for consumer loans, this
is certainly not the case today for the corporate market.
issued debentures) in many of the credit default cases that have drawn public and
Due to the increasing capital requirements imposed on the banks, there has been a
significant increase in the number of transactions offered by banks as syndicated
loans, including transactions that previously would have typically been offered by a
bank on single lender terms. Furthermore, institutional lenders appear more frequently
as arrangers, and not just as participants. In addition, there has been a significant
increase in the secondary market activity concerning non-public loans, as banks offer
institutional lenders diverse methods of participation in loans, whether as a straight
forward assignment or through derivatives, including the issuing of credit linked notes
and purchasing protection under credit default swaps. We anticipate that this trend will
grow, and that banks will continue to invite institutional lenders to participate in the loans
originated by the banks, both in respect of new transactions – as syndicated loans, and
in respect of the existing loan portfolio of the banks, by way of assignment or derivative
transactions. This trend, in combination with evolution of the regulatory requirements,
will probably reduce the gap between banks and institutional lenders.
Commercial and Consumer Segments
The increasing competition between banks and institutional lenders has had limited
influence on the commercial market segment, and almost none on the consumer segment.
In these segments the strength of the banks is based on the physical accessibility of
their branches, as well as their long-term banking relationships with borrowers. However,
a couple of recent developments may present a threat to the prominence of banks in
these segments: (i) the introduction and development of financing firms, specializing
in short term financing for commercial businesses (including factoring and similar
financing models); (ii) peer to peer financing schemes and initiatives; and (iii) attempts
to establish "social" banking corporations (such as consumers credit unions).
Short term financing firms, offering factoring and similar financing models, operate in
Israel. However, these firms face the challenge of raising funds in order to finance their
activities. Under current Israeli legislation, these firms are barred from raising debt in the
capital markets by public issuance of debentures, since raising such debt and extension
of credit as one requires a banking license. Therefore, these short term financing firms are
reliant on other sources of finance (including loans from banks and institutional lenders,
with whom these firms are to compete). In order to enable these firms to develop their
financing operations and increase their market share, an amendment of the law has been
suggested, allowing these firms to raise up to NIS 2.5 billion by public debt issuance. The
proposed amendment faces the objection of the Bank of Israel and the chances of its
success are currently unclear, and, as always, the details which will be included in such
amendment are not final. In any event, even if the amendment passes, it will limit the
potential development of these firms, as their portfolio will be capped, at any given time,
practically, to the amount of debt they can raise (in addition to their equity).
Until now, the attempts to establish credit unions have not been successful. Such credit
unions require a banking license, and, despite public support, the Bank of Israel has been
reluctant in waiving, or easing, the regulatory requirements applying to any candidate
to obtain a banking license. A major threshold relates to the minimum equity required,
which, even after concessions by the Bank of Israel, is set at NIS 75 million, a level which
such entities have not been able to reach.
Several initiatives to establish peer to peer lending schemes operate in Israel, inspired
by the success of such schemes in other countries. Presently, the influence of these
schemes is limited. However, there is an increasing interest of institutional lenders to
cooperate, invest or even acquire such schemes, as they can facilitate a consumer lending
arm for the institutional lenders, who do not benefit from the presence of country-wide
branches and have limited personnel to develop such lending operations. Once the
cooperation of institutional investors and peer to peer lending schemes evolves, the
influence on the market will certainly become more significant.
Another reform that has been supported by media and certain regulators relates to the
separation of credit card companies from the banks. Currently, all credit card companies
in Israel are controlled by banks. Some believe that if the banks are forced to divest their
holdings in the credit card companies, the level of competition in the affected segments
(commercial and consumers segments) will increase. It is not clear if, when and how such
a reform will be carried out. It is also unclear how the credit card companies will finance
their activities after such a separation from the banks, and – as a result – what effect
such a separation will have on the behavior of the relevant market participants.
Real Estate Mortgages
As a result of historically low interest rates, the real estate mortgages market continues
to grow. In order to limit the associated risks, the Bank of Israel imposed limitations and
restrictions on the amounts that can be extended to borrowers, including the limit on
mortgage loans to 50% of the real estate’s purchase price, (in certain conditions, 70-
75%), on the maximum term of the loans to 30 years, (requiring that at least 1/3 of the
loan bears a fixed rate interest), and additional restrictions.
High Yield Lenders
In addition, leverage and investment funds offer high yield loans to relevant borrowers.
These transactions involve mezzanine or other subordinate debt, but also senior loans
where the "traditional" banking financing is not available. A number of funds operate
in Israel, and can provide interesting borrowing opportunities for businesses that face
difficulties in funding their operations through "ordinary" banking loans.
Although many international banks have Israeli or Israeli related operations, they have
not entered the popular commercial and consumer segments, and have not therefore
affected competition in these segments. However, international banks are significant
participants in large corporate and infrastructure financing and are involved, both as
arrangers and as participants, in syndicated loans.
Another key field of expertise of international banks has been private banking, including
the set up and operation of representative offices in Israel and other on-shore/off-shore
It is well known that the Bank of Israel is active in the currency markets, aiming to ensure
that the Israeli shekel does not become too strong, which may be detrimental to the
Until now, no restrictions have been imposed on currency trade in Israel. Certain
regulation was introduced in 2010 and in 2011, but in essence it imposes disclosure
and reporting obligations, rather than limitations on trade. It is possible, however, that
additional regulation will be introduced in the future in order to protect the shekel from
Ronen Baharav, Founding Parnter
Preis, Baharav & Co. is an elite boutique law firm, specializing in all areas of corporate transactions and business law. Our
preeminent practice handles, on a regular basis, some of the most complex and challenging domestic and international mergers
and acquisitions and finance transactions. We provide ongoing legal advice to entrepreneurs, startup companies, funds,
institutional investors, corporations and financial institutions on transactions and on corporate and commercial matters.
Our domestic and international clients include prominent and established public and private companies, visionary startups,
entrepreneurs, institutional investors and financial institutions operating in variety of industries and jurisdictions. Our
clients engage Preis, Baharav & Co. to provide them with legal advice, both on a regular basis and for their largest and
most complex transactional matters.
Preis, Baharav & Co. was founded based on core values of partner level service, commitment to excellence, efficiency
and teamwork, and it has rapidly gained a reputation for excellence, quality and partner-level service. The firm and our
partners have been recognized in leading international rankings of law firms such as Chambers Global and Legal500. The
following has been written about us in those rankings:
Preis, Baharav & Co. has ‘a great mix of talent and experience’ … Preis, Baharav & Co. has ‘a deal-making approach’ and
‘a quality of service to match the largest and most prominent Israeli law firms’. … ‘an impressive list of clients’ … Ronen
Baharav ‘stands out at the top of the leading banking and finance lawyers in Israel’ ... Ziv Preis is ‘smart, tireless and
pleasant to work with’. (Legal500)
'The service level is exceptional, and they bring significant added value to their legal work'. Ronen Baharav … receives
excellent feedback from clients, who describe him as ’extremely smart, with an in-depth understanding of financial
transactions’, adding: ’He always provides professional added value’. … 'He is a brilliant attorney who has a keen
understanding of both legal and business issues'. ... ‘Sources are highly impressed by Ziv Preis’… He is lauded for his
‘in-depth understanding of complex M&A transactions, and his ability to resolve complex matters in an efficient and
innovative manner’. Clients are full of appreciation for his skills and say that he 'provides the quality of service of a top law
firm in a more dedicated, efficient and cost-effective manner.' (Chambers and Partners).
Recent transactions include:
• Representing an Israeli bank in the issuance of credit linked notes, linked to certain assets in the credit portfolio of
the bank, and in the sale of certain other assets in the credit portfolio of the bank, to an Israeli insurance group, in an
aggregate amount exceeding ILS 500 million;
• Representing an Israeli insurance company in connection the acquisition of a credit linked note issued by an Israeli Bank
in the amount of ILS 100 million;
• Representing an Israeli insurance group in connection with a CDS transaction with an Israeli bank in the amount of ILS
• Representing an Israeli provident funds manager in connection with funding a refinancing of municipal debentures, in an
amount of approx. ILS 95 million;
• Representing an Israeli leverage fund in several loan transactions, in the aggregate amount of approx. ILS 50 million.
office: + 972-3-541-5555
Ronen Baharav firstname.lastname@example.org
S. Friedman & Co.
Tal Enat-Ben Arieh
and Labor Law
Employees enjoy a constantly evolving level of protection in Israel through
a web of labor laws and regulations created by the Israeli legislator, working
together with an active labor judiciary. Doing business in Israel therefore
requires a thorough understanding of these laws and the legal framework
around them, the need for updates regarding any new developments and
the ability for an employer to quickly adapt.
Basic rights granted to Israeli employees under Israeli labor law
Minimum Wage Law: Enacted in 1987 the law provides a minimum hourly rate, which
is updated from time to time. Currently, the hourly rate is NIS25, however it is due to
gradually rise at July 1st 2016 and again at January 1st 2017, then it will be updated
Mandatory Pension Fund: The Mandatory Pension Insurance Expansion Order - 2008,
provides that all employees (with few exceptions) are entitled to pension insurance.
Previously, the obligation to provide pension insurance only applied to employees who
were subject to collective bargaining arrangements or pursuant to the terms of one’s
Pension funds require employers to contribute for the “remuneration” of the employee,
an amount equal to 5%-6% of the employee’s monthly salary, up to a maximum amount
determined based on the average monthly salary in Israel (approximately NIS9,300 as
of August 2015). These contributions will constitute the employee's pension fund at
his retirement, along with additional statutory contributions for severance payments
(6-8.33% of the employee’s salary).
Israeli pension funds also include a disability insurance component, part of the
aforementioned contribution, which can also be paid separately. In addition, the employer
is obligated to deduct 5.5-6% from the employee’s monthly salary and transfer such
amount to the employee’s pension fund.
Severance Payment: Pursuant to the Israeli Severance Payment Law – 1963,
upon dismissal (and under certain circumstances in connection with an employee’s
resignation), an employee is entitled to receive severance payment equal to the amount
of the employee’s latest monthly salary multiplied by the number of years of continuous
employment with the same employer or at the same place of employment.
Each month employers may set-aside an amount equals to 8.33% of the employee’s
salary to ensure compliance with the statutory obligations. Since the amount set aside
is a percentage of the employee’s monthly salary, whereas the severance payment is
calculated based on the employee’s latest monthly salary, shortfalls in the employer’s
aggregated contributions or severance reserve could occur. In order to avoid this
potential liability, the law allows the employer and the employee to agree that the latter
shall only be entitled to receive, upon termination of his employment, all severance
payment amounts actually set aside during the course of his employment.
This arrangement also provides that the employee will be entitled to severance pay upon
resignation (as opposed to dismissal) something he would not otherwise be entitled to.
Termination - Prior Notice: Employees, who have been employed by the same
employer for more than one year, are entitled to receive, at minimum, a 30-day prior
notice. Employees who are employed on an hourly basis or have been employed for less
than a year are entitled to a shorter prior notice period.
Workweek and Overtime: The Hours of Work and Rest Law – 1951 (“Work and Rest
Law”) sets forth a five/six day working week consisting of 43 hours. The Israeli legislator
also limits the maximum number of overtime hours an employee is entitled to perform
and regulates the payment for such working hours. Generally, payment for overtime hours
(above the 8th or 9th hour of work per day or the 44th hour of work per week) is calculated
as follows: (a) each of the first two hours of overtime, is paid on a 125% basis and (b)
any hour thereafter is paid on a 150% basis. The Work and Rest Law provides for several
exceptions, including for employees holding management positions that require a special
measure of “personal trust,” who are not entitled to special remuneration for overtime.
Weekly Rest Day: Employment of Israeli employees on a Saturday is subject to receipt
of regulatory permits from the Ministry of Economy.
Vacation: The Annual Vacation Law - 1951, sets forth the minimal number of annual
vacation days to which an employee is entitled. The laws also establish certain legal
holidays during which the employee is entitled to a day off, in addition to his annual
Sick Leave: According to the Sick Leave Payment Law - 1976, an employee is entitled
to one and a half days of paid sick leave per each full month of employment, up to a
maximum of 90 days. Sick days may be accumulated and carried over but not redeemed.
An employee is entitled to a sick leave payment, as of the second day of absence, in an
amount equal to 50% of his daily salary, and as of the fourth day of absence, for full pay.
Key non-statutory elements of the Israeli labor law regime
Collective Agreements; Expansion Orders: Collective labor agreements, arrangements,
and expansion orders serve to standardize various binding employment conditions. The
issues usually addressed by them are wages, social rights, working hours, payment for
overtime and dismissal-related matters. Any employer that is a member of an employers’
organization is subject to all general collective agreements and arrangements to which
that organization is a party.
Expansion orders are administrative mandates issued by the Minister of Economy based
on general collective agreements. The expansion orders serve to expand the content of
collective labor agreements so that their provisions shall also apply to employers and
employees that were not initially a party thereto. Several expansion orders are applicable
to all Israeli employers and employees (such as recuperation pay and reimbursement of
Termination – Hearing Proceeding: Under Israeli law, a prior hearing proceeding is
a prerequisite to the termination of employment of any employee, regardless of the
employee's position or seniority. In the mandatory written hearing notice, the employer
must present valid reasons for considering such termination and give the employee
sufficient time to prepare for the hearing. At the hearing, the employer must give the
employee the opportunity to reply to the issues mentioned in the hearing notice. Failure to
hold any of these demands, might lead to a wrongful termination suit against the employer.
Rules under Israeli labor law aimed at protecting the employees' nonfinancial
Employment Agreement: Under the Law of Notice to an Employee (Terms of
Employment) – 2002, an employer is required to provide each new employee, within 30
days of the start of employment, with a written notice outlining certain terms of his/
Discrimination: The Law of Equal Opportunities at Workplaces – 1988 prohibits a
differential treatment of employees based on gender, race, sexual orientation, religion,
etc. Differentiation between employees will not be deemed discriminatory if it is due to
the specific nature or characteristics of the job or position. Furthermore, under Israeli law
it is prohibited to differentiate with respect to employment terms between female and
male employees performing similar jobs. With respect to age discrimination, it is worth
noting (a) that the mandatory retirement age for both female and male employees in
Israel is 67 and (b) that in recent years, the labor courts have held that the mere fact
that the employee has reached the mandatory retirement age does not necessarily
constitute a reason to terminate his/her employment.
Female Employees: The Employment of Women Law – 1954 (the “Women Labor Law”),
provides a broad umbrella of protective provisions to Israeli women employees and for
men who are willing to take on the role of primary child caregivers. The Women Labor
Law prohibits the termination of an employee undergoing fertility treatments or who is
pregnant, without the employer having obtained the approval of the Commissioner of
Employment of Women in the Ministry of Economy in the Ministry of Economy. The law
also prohibits the termination of an employee who is on maternity leave until 60 days
after her maternity leave ends.
Disabled Employees: A recent expansion order, applying to all employers, requires that
all employers that employ over 100 employees must integrate in their organizations
people with disabilities (whether physical or mental). By 2016, all organizations
employing more than 100 employees will need to show that at least 3% of their labor
force comprises people with disabilities.
Recent trends in Israeli labor law
Unionization Attempts: In recent years, the Israeli labor courts have upheld a number
of initial attempts by employees to organize collective employment relationships at their
respective companies by joining labor unions, several of which are in the high-tech industry.
In light of these precedents, the applicable rules in this area are evolving at a rapid pace. Security, Catering and Cleaning Service Providers: Recently, the Israeli legislator has
imposed on companies engaging workers in the security, catering and cleaning service
sectors an increasing obligation to ensure that these workers are being compensated
in accordance with applicable laws. The legislator also placed administrative, civil and
criminal liability on the companies benefiting from such services, who will fail to meet
their statutory oversight obligations.
Tal Enat-Ben Arieh
Operating from our offices in Tel Aviv and Haifa, we represent and provide legal advice to some of Israel’s largest
corporations as well as multinational corporations operating in Israel. The firm’s multidisciplinary approach and its
embrace of a fruitful collaboration among attorneys from different practice groups, enables us to provide our clients with
effective solutions that are uniquely tailored for each client’s needs and the particulars of every transaction. Our clients
represent a wide spectrum of sectors, including shipping, homeland security, industrial companies, retail, medical devices,
on-line advertising, pharma, higher education, high-tech, bio-tech, and others. Our comprehensive experience and the
highest degree of expertise of our team, result in longstanding relationships with our clients, which are a rarity nowadays.
Moreover, the fact that our firm has succeeded in maintaining those relations is the most powerful proof of the quality of
our services to our clients and the high regards in which our clients uphold our advice.
The firm’s Labor and Employment Law Department is renowned for its extensive experience, broad range of expertise
and innovative solutions with respect to all aspects of Israeli labor and employment law both on the individual and the
collective levels. The Department represents and advises some of Israel’s largest employers, including private and public
companies, non-profit organizations and academic institutions, as well as multinational companies operating in Israel.
The Department guides its clients on all aspects of labor law and labor relations including with respect to employee
recruitment and termination, collective bargaining processes, work disputes and strikes and with respect to a host of
employment-related matters in connection with M&A transactions. The Department frequently represents clients in all
legal proceedings before labor courts, various government authorities as well as in alternative dispute resolution tribunals
and mediation procedures. The Department works closely with other practice groups within the firm to provide clients
with comprehensive solutions to all of their labor law needs.
Adv. Tal Enat-Ben Arieh With over 25 years of experience in the field, Tal, who is considered among Israel’s leading
labor and employment attorneys, heads the firm’s labor and employment practice group. Tal’s expertise focuses on labor
law, both collective and individual. Tal specializes in representing employers on a wide range of employment law matters,
including employment and consulting agreements, collective arrangements and executive compensation and regularly
advises clients in connection with sensitive and complex employment situations. Tal’s extensive expertise in labor law
litigation ranges from individual claims to collective disputes, strikes and other emergency situations.
Adv. Efrat Siboni is a partner at the firm’s labor and employment practice. Efrat provides clients with legal advice on a
wide range of labor and employment law issues. Efrat has gained extensive litigation experience representing employers
before the Israeli labor courts and in mediation, and other dispute-resolution proceedings.
During the last 12 months the department has handled unique and unprecedented legal issues, such as:
· The representation of a global shipping company as part of a worldwide debt restructuring whereby the company was
required to address employees’ strikes-related issues and negotiate the terms of new collective agreements.
· Advising a Fortune 500 multinational company in all of its Israeli labor and employment law issues, including a complex
termination of employment process of an entire subsidiary’s workforce.
office: + 972-4-854-6666
Tal Enat-Ben Arieh email@example.com
SETTING THE BENCHMARK
3 ALUF KALMAN MAGEN ST., 3RD FLOOR, SARONA, TEL AVIV, ISRAEL