Inbar Hakimian-Nahari of Yigal Arnon & Co explains how Israel's new law provides clarity and makes it easier for foreign companies and investors operating in the country
In September 2019, the Insolvency and Economic Rehabilitation Law, 5778-2018 will come into force in Israel. The new law is a comprehensive insolvency legislation for individuals and corporations, which includes extensive changes to the current insolvency legal framework, while also incorporating customary practice and legal precedents.
The contemporary Israeli economy is rapidly increasing its profile in the global economy, and has seen growth in activity by both local and foreign players in its capital markets, initial public offerings and start-ups. This welcome development necessitated that the Israeli legislator include regulation of international insolvency proceedings by adopting certain parts of the Model Law on CrossBorder Insolvency (1997) into Chapter 9 of the new law. The Model Law, developed by UNCITRAL, was already adopted by 44 countries.
The legislator's reasons for adopting the Model Law principles were: promoting co-operation between Israeli and foreign authorities regarding international insolvency proceedings; increasing legal certainty in areas of trade and investments; protecting creditors, third parties and even debtor interests; assuring that the value of debtors' assets will be maximised for the benefit of the insolvency proceeding; and assisting in rehabilitation of financially distressed businesses, thus protecting investments and maintaining employment.
Chapter 9 of the new law adopts a direct-access principle regarding: assistance requests of foreign authorities from the appropriate Israeli authority or an Israeli-appointed trustee, regarding foreign proceedings and vice versa (thereby cutting the red tape); provisions regarding simultaneous foreign and Israeli insolvency...