Expanding operations into new markets is a significant step for any business seeking growth and global reach. Israel, known for its vibrant economy and thriving startup culture, has emerged as an attractive destination for foreign companies looking to establish a presence in the region. Founding a subsidiary in Israel can offer numerous advantages, including access to a highly skilled workforce, cutting-edge innovation, and favorable business incentives. However, like any international business endeavor, there are legal considerations and processes that must be carefully navigated. In this article, we will explore the essential legal aspects involved in founding a subsidiary of a foreign company in Israel.

Registration Process: The Israeli Companies Law mandates that all companies, including subsidiaries, must be registered with the Israeli Companies Registrar. The registration process involves submitting various documents, including the articles of association, details of shareholders, directors, and the registered office address in Israel. The Registrar reviews the application and, upon approval, issues a certificate of incorporation.

Articles of Association: The articles of association outline the internal regulations and governance structure of the subsidiary. It typically includes provisions regarding the company’s objectives, share capital, voting rights, appointment and removal of directors, and procedures for shareholder meetings. The articles of association must comply with the requirements set forth in the Israeli Companies Law.

Directors and Shareholders: When establishing a subsidiary, it is necessary to appoint at least one director who meets the residency requirements under Israeli law. At least one director must be a resident of Israel or a citizen of an EU member state. The subsidiary must also identify the shareholders and their respective ownership stakes. Shareholders can be individuals or legal entities.

Share Capital: The Israeli Companies Law requires that the subsidiary has an authorized share capital, which represents the maximum amount of capital that the company is authorized to issue to its shareholders. The share capital can be divided into different classes of shares, each with specific rights and privileges.

Registered Office: The subsidiary must have a registered office in Israel, which serves as its official address for communication and legal purposes. The registered office must be a physical address within Israel, and it is where official correspondence and notices from government authorities, shareholders, and creditors will be sent.

Compliance and Reporting Obligations: Once the subsidiary is registered, it becomes subject to various compliance and reporting obligations. This includes maintaining proper accounting records, filing annual financial statements, holding annual general meetings, and complying with statutory requirements regarding disclosures and resolutions.

It is crucial to consult with legal professionals experienced in Israeli corporate law to ensure compliance with the specific requirements of the Companies Law. They can guide foreign companies through the intricacies of the registration process, help draft the articles of association, and ensure adherence to all legal obligations when forming a subsidiary in Israel.