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[null,"Prepared By:","Contributors:"]
[null,"S. Horowitz & Co."]
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["Social Enterprise Law Surveys"]
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["Report Generated: 4/25/2025"]
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["View your report results on next tab"]

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["Question","Israel"]
["I. Enterprise Form"]
["What jurisdiction(s) do you practice in?","Israel\n"]
["What are the most commonly used types of for-profit corporate organizational forms in your jurisdiction (e.g., corporation, limited liability company, benefit corporation, social purpose corporation, etc.) used by Enterprises operating a trade or business (rather than for investment or holding company purposes)? Please briefly describe these forms. a. Of these, which are the most common for-profit organizational forms used by Enterprises seeking financing from investors and that will have multiple owners? b. Other than organizational forms specifically designed for Social Enterprises (and discussed below under Question 4), which, if any, are the most common for-profit organizational forms used by Social Enterprises?","The most common for-profit organizational form utilized in Israel is the company. In a company, the shareholders' liability for the company's debts is limited to the amount, if any, unpaid for their shares, and the manner of limitation will be specified in the company's articles of association.\nIn addition, there is a \"Public Benefit Company\" (\"\nPBC\"). PBC is a company the articles of association of which set out only public purposes and prohibit the distribution of profits or other distributions to its shareholders.\na. The most common form is the company, due to the attraction of limited liability coupled with flexible ownership structure (such as different classes of shares).\nb. Again, a company; the members can mutually agree to operate in a manner consistent with their business’s values.\n"]
["Do any of your jurisdiction’s traditional organizational forms require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making? What other interests, if any, are they required to or allowed to consider (e.g., interests of employees, customers, the environment, etc.)?","While shareholder value is key, business considerations can also include the interests of creditors, employees and the interests of the public.\nIn addition, a company may donate a reasonable amount to a worthy cause, even if the donation is not within the scope of such business considerations, if a provision to that effect is stipulated in the Company’s articles.\nThe interests to be considered in a PBC are the public interests as set out in the Israeli companies' law.\n"]
["Does your jurisdiction have organizational forms specifically designed for Social Enterprises? If so: a. What type(s) of organizational forms are they? b. How do they materially differ from the most closely analogous traditional organizational form? c. What are the main benefits for founders and funders of such organizational forms? d. Are there any restrictions on the use of these organizational forms (such as profit-caps, stakeholder involvement and impact reporting)? If there are, what are they? e. Are there any material differences in timing or costs for forming a Social Enterprise versus a traditional Enterprise? f. How prevalent and well known are Social Enterprise forms?"," Yes \n\n a. In Israel there are 2 forms specifically designed for Social Enterprises: \n\n \n\t PBC : As described above. (The profit form) \n\t Non-profit organization (\" NPO \"): A corporation whose main purpose is not to make profits and that does not distribute profits among its members. (The non-profit form) \n \n\n b. The differences are: \n\n \n\t PBC : Different from a regular company in that it operates for public purposes only, and in that it is prohibited to distribute profits to its shareholder. \n\t NPO : Different from a regular company in that it operates on a non-profit basis and with no sharing of profits among its members. \n \n\n c. Main benefit is that management can and must consider factors other than shareholder value, so shareholder profit is not a guiding factor. This also makes the venture attractive to impact investors. \n\n d. The restrictions for each are: \n\n \n\t PBC : \n\n\t \n\t\t PBC is not allowed to make a distribution of profits, including a distribution of profits to the company's entrepreneur, and any distribution of profits made by it will be considered a prohibited distribution. \n\t\t A shareholder in PBC shall not transfer a share of his shares in return unless the court has given its prior approval after the Registrar of Dedications has been given an opportunity to express his position. \n\t\t The shareholders of the PBC will not be entitled, at the time of liquidation, to a share in its assets, merely because they are shareholders. \n\t \n\t \n\t NPO : Membership in the NPO is personal, non-transferable and non-inheritable. \n \n\n e. No timing or cost differences (though after formation, there may be cost differentials in preparing reports). \n\n f. The PBC form has been around for approximately 13 years. The NPO form has been around for approximately 40 years. \n"]
["Are Social Enterprises permitted to be formed and operated as Nonprofits? If so: a. Are Nonprofits that are Social Enterprises treated differently under the law as compared to Nonprofits that are not Social Enterprises, whether from a corporate, tax or other perspective? b. Are there any material benefits of, and/or restrictions on, using a Nonprofit form for Social Enterprises that does not apply to Nonprofits that are not Social Enterprises? c. Is there any type of “hybrid” Nonprofit form that requires less reporting and/or allows for faster formation? If so, please describe the drawbacks of utilizing this form (i.e. fewer tax benefits). d. How prevalent is the use of Nonprofits for Social Enterprises?","Yes.\na. & b. No. The Non-profit organizations Law, 1980, applies equally to NPOs, regardless of their purposes.\nc. No.\nd. The NPO form has been around since 1980, and is a common way to set up Social Enterprises. However, with the establishment of the PBC form (the profit form) in 2007, the use of NPOs decreased. However, we have no statistical information on the subject.\n"]
["Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms.","Yes. In Israel, there is a form of \"Cooperative Association\". The goals of the association are to cultivate the savings, self-help and reciprocity between people with common economic interests, in order to bring about improvement of their living conditions, business and production methods, or an association prepared to facilitate the activities of such associations. The main limitation is limiting the degree of participation of a member in the cooperative association. When an association has share capital, no member other than a registered association or incorporated body admitted as a member may hold more than one-fifth of the share capital.\nWhen the association has no share capital, no member other than a registered association or incorporated body admitted as a member may purchase or claim a degree of participation in the association's capital to more than one-fifth of the capital.\n"]
["Are there unique reporting requirements for Social Enterprises? If there are, please describe them. Please also discuss what government bodies Social Enterprises are required to report to."," If a Social Enterprise decides to organize as an NPO or PBC it will be subject to reporting requirements that are not applicable to traditional corporations, as follows: \n\n NPO : \n\n \n\t A financial report must be prepared for the NPO once a year. The financial report must be submitted to the auditing body no less than two weeks before the day of the general meeting or at an earlier date stipulated in the bylaws and presented to the general meeting for approval. \n\t A notice must be attached to the financial report, detailing all the payments made by the NPO or undertaking to pay, in the year for which the financial report is submitted, to each of the five highest salary recipients in the NPO, including details regarding retirement conditions. This must be submitted to the Registrar of NPOs no later than June 30 of the year following the end of the reporting period. \n\t An NPO whose turnover exceeds NIS 300,000 (approximately $ 92,000) must indicate in the financial report and on its website, whether or not it received, in the year to which the financial report relates, donations from foreign entities exceeding NIS 20,000 (approximately $ 6,000). \n\t The NPO must submit to the Registrar of NPOs, at its request, and within a period to be determined, any additional document or information that it deems appropriate, for clarification of details specified or that should have been specified in the financial report submitted to it. In addition, the Registrar of NPOs may require that an amended financial report be submitted. \n \n\n PBC:   \n\n \n\t The PBC has the same reporting requirements as the NPOs as stated above, with the only difference being that wherever the PBC Registrar is mentioned the reference is to the Registrar of Dedications. \n\t A PBC which is required to submit annual accounts and other reports, shall also submit them to the Registrar of Dedications. The notice regarding the transfer of shares or appointments to the board of directors and changes in its composition shall state that the former shareholder or the director appointed, as the case may be, knows that the company is a public benefit company. \n \n\n   \n\n   \n"]
["In your jurisdiction, has case law and jurisprudence evolved to address Social Enterprises? If there is meaningful jurisprudence around Social Enterprises, please provide some brief examples.","As for PBCs, since it is a relatively new form, there is not much case law. As for NPOs, the case law regarding NPOs discusses individual issues relevant to the parties to the dispute, and does not materially add to the law.\n"]
["Does your jurisdiction have any ESG requirements for Enterprises generally? If it does, please describe.","No.\n"]
["Does your jurisdiction have any ESG requirements specifically for Social Enterprises? If it does, please describe.","No.\n"]
["Does your jurisdiction have any ESG requirements for investors? If it does, please describe.","No.\n"]
["II. Funding"]
["Are any major investor classes (e.g., pension funds, mutual funds, etc.) required to look at ESG issues when making investment decisions in your jurisdiction? a. If they are, please describe the requirements. b. If they are not, are they permitted to consider such factors? c. What other relevant factors do investors tend to consider (aside from profit motive).","No major investor classes are required to look at ESG issues.\n"]
["What kinds of philanthropic funding do Social Enterprises in your jurisdiction commonly receive (e.g., grants, charitable investment, traditional investment)?"," Social Enterprises receive grants, charitable investments, traditional investments and funding from \"Public benefit funds\". The type of funding typically varies based on the Enterprise form that the Social Enterprise chooses. For example, In Israel, there is a form called the \"Public Benefit Fund\" (\" PBF \"). PBF is a PBC that the Registrar of Dedications has recognized as a PBF, and the articles of which set out only goals that are one or more of the following: \n\n \n\t PBC activity funding;  \n\t Funding of NPO activities whose purposes are public purposes. \n\t Funding the activities of academic institutions. \n\t Funding the activities of health institutions. \n \n\n The PBF is subject to certain provisions in the Israeli Companies Law, which regulates the ways of funding the relevant entities. \n"]
["How prevalent, if at all, are new for-profit impact investments in your jurisdiction (e.g. traditional instruments with impact terms, new investment instruments, aggregation with philanthropic capital, community based funding, etc.)?","For-profit impact investments have been increasing in Israel and parties are becoming more familiar with them. Many prominent investors are forming specific impact funds (for example, in 2018, a famous Israeli f philanthropic Fund called the \"Edmond de Rothschild\" Fund announced that it would allocate 5% of the fund's investment budget to impact areas investments).\n"]
["What are the types of government funding and support available to Social Enterprises, if any, available in your jurisdiction (e.g., grants, investments, bonds, and guarantees)? a. How difficult is it for Social Enterprises to obtain government funding? b. Is any government funding limited to Enterprises incorporated using Social Enterprise forms?","Government ministries support social enterprises, usually in the form of grants. Government expenditure to support Social Enterprises will be determined in each budget section in a total amount for each type of Social Enterprises. The amount determined in the budget section for a type of public institution will be divided among public institutions belonging to the same type according to equal tests.\na. In Israel, it is common for Social Enterprises to receive government funding, there is a dedicated budget allocated for this, and this is not a particularly difficult procedure. In order to receive funding, the corporation must be incorporated and comply with the provisions of the annual procedure to a degree that is consistent with the tests for providing government funding.\nb. In order to receive the funding, the entity must be incorporated as aforesaid, both in the form of PBC and in the form of NPO. Government funding will be given only to Social Enterprises operating for the purpose of education, culture, religion, science, art, welfare, health, sports or similar purpose.\n"]
["Are there any companies that are formed as a Social Enterprise listed on your jurisdiction’s leading securities exchange(s)?","No.\n"]
["To what extent are publicly traded Enterprises required to disclose ESG related factors in annual reports/public filings in your jurisdiction.","N/A\n"]
["How prevalent, if at all, are impact bonds in your jurisdiction?","Impact bonds are not very prevalent.\n"]
["In your jurisdiction, are there any restrictions on foreign investments or donations that are unique to Social Enterprises (whether incorporated as for profit entities or as Nonprofits)?","Yes, as mentioned above, Israeli law stipulates both in relation to PBCs and in relation to NPOs that Social Enterprises whose turnover exceeds NIS 300,000 (approximately $ 92,000) must indicate in their financial report and on their website whether or not they received, in the year to which the financial report relates, donations from foreign entities exceeding NIS 20,000 (approximately $ 6,000). The Social Enterprise must do everything in its power to determine whether the donation came from a foreign entity, and the reporting obligation as stated in this section will apply if it knew or should have known that the donation was from a foreign entity. \n"]
["Is “crowdfunding” legal in your jurisdiction? Are there rules under applicable securities laws that make it easier for smaller businesses or Social Enterprises to take money from investors that are not sophisticated/accredited/qualified under applicable statutes?","Crowdfunding is legal, allowing small businesses and Social Enterprises to solicit investment from the general public. Currently, there is no regulation regulating crowdfunding. However, note that crowdfunding for Social Enterprises is done without a \"pre-purchase\" consideration or the provision of securities. Crowdfunding in the context of Social Enterprises is a non-returnable investment for philanthropic reasons, and it is no different from any other contribution.\n"]
["III. Tax"]
["Are there any tax exemptions that are uniquely available for Social Enterprises? a. Please describe any tax exemptions that are available and whether they are partial or full. b. Are they dependent on the Social Enterprise utilized using a specific organizational form (e.g., for profit vs. Nonprofit form)? c. Please describe any other key requirements of the available tax exemptions (e.g., restrictions on sources or uses of funds, restrictions on commercial activities, etc.).","There are tax exemptions available for Nonprofits generally, but there are no tax exemptions that are uniquely available for Social Enterprises.\nNonprofits (whether or not Social Enterprises) - that are defined as \"Public Institutions\" for Israeli income tax purposes - are generally exempted from income tax in respect of income that is not generated from business. In the event that said Public Institution has also received a specific approval from the relevant regulators, then donations made to such Public Institution will be deductible by the donor for income tax purposes (under certain terms and subject to certain limitations). There are also specific benefits and different treatments for nonprofits in respect of real estate tax, VAT and some other tax purposes.\nThe list of requirements for the availability of tax exemptions for Public Institutions is very long and complicated. There are many restrictions that cannot be detailed in this short form of answer.\nIn the event that a Social Enterprise will not be able to be classified as a Public Institution for Israeli tax purposes (because it is a for profit entity), then it may examine its potential entitlement to benefit from the Israeli encouragement laws (such as the Encouragement of Capital Investments Law) that are relevant for various business purposes (such as the encouragement of employment and the location of enterprises in specific territories). \n"]
["Are individuals or other organizations able to provide tax deductible donations to for-profit Social Enterprises? If they are, please describe any restrictions applicable to tax deductible donations?","No.\n"]
["Are there any other tax benefits uniquely available for Social Enterprises? (e.g. deferrals, favorable tax rates, business deductions, etc.)","No.\n"]
["Does your jurisdiction provide for reciprocal recognition of tax-exempt status that has been granted under the law of any other jurisdictions?","No.\n"]
["IV. Governmental Infrastructure"]
["Does your jurisdiction have Regulatory Sandboxes or similar policy frameworks for Social Enterprises? If it does, please describe.","No.\n"]
["What government operational support, resources, training or services, are available for small businesses or Social Enterprises?","As for Social Enterprises, see answer II(4) above, as for small businesses, there is a state-guaranteed loan route.\nAs part of the spread of the COVID-19 pandemic, there are additional benefits such as - shortened route for a state-guaranteed loan, and a provision of grants to both Social Enterprises and small businesses that have been economically damaged as a result of the pandemic.\nhttps://www.sba.org.il/hb/AidPrograms/Pages/pr10.aspx (in Hebrew)\n"]
["Are there different compliance requirements for different types of Social Enterprises than for traditional Enterprises? Please provide examples if there are.","Government funding for Social Enterprises and funding for small businesses is done from different government offices, from different budgets and for different reasons.\nThus, as stated, in order to receive funding, the Social Enterprise must be incorporated and comply with the provisions of the annual procedure to a degree that is consistent with the tests for providing government funding.\nThe main requirements for small businesses that require a state-guaranteed loan are: that their turnover be up to NIS 100 million (about $ 92,000), and that the businesses provide adequate collateral depending on the amount of the loan.\nhttps://www.sba.org.il/hb/AidPrograms/Pages/pr10.aspx (in Hebrew)\n"]
["Is there a dedicated government agency or department that oversees Social Enterprises? If there is, please describe its mandate and effectiveness.","Yes, there is a PBCs and NPOs unit, which is responsible for the handling, registration, supervision and control of them.\nLINK(in Hebrew)\n"]
["Is there a different bankruptcy system available for Social Enterprises?","No.\n"]
["VI. Miscellaneous"]
["What are the average time and filing fees to form an Enterprise in your jurisdiction?","Depending on the current processing times and whether the documents are filed online, in person, or by mail, generally it can take five to seven days to form a legal entity in Israel (some types take longer than others).\n"]
["What government or third-party certifications or accreditations, if any, are available for Social Enterprises that allow for access to benefits e.g. funding, beneficial tax status, etc.? Please provide examples and briefly describe them as well as the standards there are to maintain them.","The Israel Tax Authority grants tax benefits to individuals or corporations that contribute to Social Enterprises. The Israel Tax Authority grants Social Enterprises a \"public institution certificate\" that creates an incentive for donors to donate to Social Enterprises.\n"]
["Please describe whether, in your opinion, startups and other entrepreneurial Enterprises generally can easily form and flourish in your jurisdiction.","Yes, startups can easily form and flourish in Israel. They have a number of Enterprise forms available to choose from, there are relatively few reporting requirements for private for-profit businesses and incorporation processes are fast, cheap and simple.\n"]
["Please describe whether, in your opinion, Social Enterprises, in particular, can easily form and flourish in your jurisdiction.","Yes, Social Enterprises can easily form and flourish in Israel. There is extensive regulation detailing the ways in which the Social Enterprise is set up and conducted, there is the PBCs and NPOs unit that provides assistance and guidance to the Social Enterprises, and there is a complete willingness on the part of the government and individuals to fund and contribute to the Social Enterprises.\n"]
["Please describe whether in your opinion there are any laws that are obstructive to the formation of Social Enterprises (i.e. that actively disfavor or penalize, or otherwise discourage their formation) in your jurisdiction (for example, are Social Enterprises subject to legislation prohibiting inclusion of Social Enterprises in government contract procurement)?","In our opinion there are no laws that are obstructive to the formation of Social Enterprises in Israel.\n"]
["In your jurisdiction, are there any major fraud concerns or defects due to corruption or fraud that should be addressed? If there are, please briefly discuss the concerns or defects.","No.\n"]
["What changes to the law do you think would be most beneficial to enabling Social Enterprises to flourish in your jurisdiction?","1. Increasing the government budget earmarked for assistance to Social Enterprises.\n2. Flexing the rules for providing government funding to Social Enterprises, so that more Social Enterprises will be eligible for government funding.\n3. Making crowdfunding easier and more accessible to broaden public investment in Social Enterprises.\n"]
["What changes to the law do you think would be most beneficial to enhancing the social and environmental responsibility of Enterprises generally (whether or not Social Enterprises)?","Implementing a uniform set of standards for ESG policies and reporting of public companies would make it easier for investors and consumers to compare and evaluate which enterprises are in fact doing good in the world, which would drive companies to perform better.\n"]
["Is there anything else you would like to add or guidance you would like to provide? Are there any questions we should have asked but did not?","No.\n"]