Business Environment

Business Environment

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גדול

Business Entities

Companies 

The Israeli Companies Ordinance defines a company as a corporation formed and registered in Israel, in accordance with Israeli law. 

Most companies limit the personal liability of their owners, usually in the form of shares. In this case, the term “Limited” (or the abbreviation “Ltd.”) must appear as part of the full name of the company. 


 
Private Company 
Consisting of 1-50 shareholders, and one director, may not offer or sell debentures or shares to the public. 


 
Public Company 
A company which registers its stocks at the stock market, or offers the stocks to the public in Israel by a prospectus in accordance with the requirements of the Israeli Securities Law. The minimal number of shareholders in a public company is seven. 


 
Foreign Company 
A company incorporated overseas may establish a place for business (branch office, subsidiary) in Israel as long as it is registered as a foreign company with the Registrar of Companies. 


 

Non-profit Organization 

Non-profit organization (NPO) is a general term encompassing public institutions, associations and companies that are dedicated to the public’s benefit and use their funding to further advance those benefits, without sharing profits, if such exist, between its members. 


 
Cooperatives 
Cooperatives are a relatively new form of companies. A cooperative works to promote the welfare of its members, unlike NPOs, it does not deny the option to share profits between its members. 


 
Partnerships 
The Partnership Ordinance defines a partnership as an entity that consists of persons who contracted for the purpose of conducting a business in order to make profits. The personal liabilities of the partners are not limited unless they are limited partners of limited partnerships. A foreign partnership is also permitted to do business in Israel. 






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​ Intellectual Property

Israel Patent Office (IPO) 

Patents, designs and trademarks registration and legal protection granting are authorized by the Israeli Patent Office. The IPO operates under the auspices of the Ministry of Justice. 

Patents 

Patents in Israel are organized in accordance with the Patents Law (1967). According to the law, a person with an innovative, potentially useful and advanced in its field invention is eligible to apply for patent registration. The patents are granted legal protection in Israel by the IPO. 

In addition, there is an option to apply for international patent registration: Israel has been a member of the PCT (Patent Cooperation Treaty) since 1996. Israeli citizens or residents can file an international patent application with the IPO PCT Department in order to seek international patent protection for their invention. In addition, the IPO also functions as a recognized International Searching and Examining Authority. Hence, an Israeli citizen or resident can also choose the IPO for international search and preliminary examination activities. 

Designs 

A registered design is a property right enabling protection on a new or original industrial product design. According to the Patents and Designs Ordinance (1926), a design can be registered for any object or industrial product with shape, design or decoration noticeable to the eye, that is new or original and that has not been sold, marketed or published in Israel prior to the application. The design registration is under the authority of the IPO. A registered design at the IPO grants its holder exclusive right of use of the design only in Israel. 

In addition, Israel is a member of the Paris Treaty. The membership enables an applicant who filed an application design in Israel to request the same priority date for the same design in other member countries. 

Trademarks 

The IPO is in charge of trademark applications as well. The registration of a trademark in Israel only provides territorial protection, and is applicable only under Israeli jurisdiction. 

In addition, Israel has joined the Madrid Protocol; hence, an Israeli applicant may submit a single trademark application that can be automatically applied in over 90 countries. The filings are done under the Madrid System. 


 
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Antitrust Laws

Restrictive Trade Practices Law 

Israel’s Restrictive Trade Practices Law is the primary law in the restraint of trade field. The law was legislated in order to prevent business from disrupting free competition in the markets. The law authorizes the Israeli Antitrust Authority (IAA) to take action when free competition in a certain market or field might be negatively affected by a business activity. 

The IAA is an independent government agency established in 1994 under an amendment to the Antitrust Law. The authority mandate includes preventing market power, preventing abuse of dominant position, enhancing the competition in the Israeli markets and advising the government and the Knesset about the competitive implications of their actions. 

 

The Law for the Promotion of Competition and Reduction of Concentration 

The law was enacted in 2013 and deals with three aspects of competition promotion: Various market and state essential considerations regarding public assets allocation, limiting the control on pyramid companies and separating large non-financial corporations and large financial entities. 

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​Financial Reporting and Auditing

The Israeli Accounting Standards Board 

The main institute responsible for financial reporting standards in Israel is the Israeli Accounting Standards Board (IASB) which publishes the financial reporting standards required for companies in Israel. The accounting principles published by the IASB are considered the Generally Accepted Accounting Principles (GAAP) in Israel. It is important to note that the IASB is not an official government entity, but is instead a non-profit limited liability company that was established in 1998. 

The Israeli Companies Law (1999) states that private companies must report their accounting records by “acceptable reporting standards” which are not defined in the law itself. However, due to precedents set forth by Israeli Courts, it is agreed that the IASB is the authority in charge of determining these standards.

Regarding public companies, since 2008, public companies in Israel are obligated by IASB standards to use the International Financial Reporting Standards (IFRS), a set of accounting standards that have been developed by the International Accounting Standards Boards. 

Private companies however can either use the International Financial Reporting Standards (IFRS), IFRS for Small and Medium Entities (IFRS for SMEs), or standards published by the IASB. Each of these options is acceptable by the IASB as a proper accounting method. It is important to note that private companies owned mostly by foreign citizens can apply to use other accounting reporting standards (for example, standards used in the United States – complying with GAAP-US). Companies must be consistent with their choice of accounting method. 

Audit Requirements 

The Israeli law concludes that Israeli companies are required to appoint a certified accountant to audit their annual financial reports. Both private and public companies must present annual reports. Private companies are obligated to file an annual report to the Registrar of Companies once a year. 

Public companies are obligated to file annual, quarterly and immediate reports (upon the occurrence of certain events) to Israel’s Securities Authority. 


 

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Stock Market

​The Tel Aviv Stock Exchange (TASE), also known as “The Bursa”, is a private company, which was established in 1953 in order to institutionalize and serve securities trading in Israel. The TASE is currently the only stock exchange operating in Israel and handles trading in a variety of financial instruments, including shares, government and corporate bonds, options, futures and more. 

As of December 2015 there were 577 publicly traded companies in the TASE with a total worth of over 244 billion USD. 

The TASE business week lasts from Sunday to Thursday, from 09:00 to approximately 17:25 – there is no trading on Fridays and Saturdays. In addition, trading hours are usually different during Israeli national holidays. 

Companies interested to be traded on the TASE have to follow criteria set forth in its regulations related to the company’s equity after its IPO and its public holdings value. 

Top market indices in the TASE include “TA-25 Index”, which lists TASE’s largest 25 market cap stocks, and the “TA-100 Index”, which includes the top 100 traded companies by market cap. 

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