regarding precedent legislation in Israel with respect to insolvency proceedings that involve international aspects, enacted under the Insolvency and Economic Rehabilitation Law

We are happy to share with you this Newsletter regarding precedent legislation in Israel with respect to insolvency proceedings that involve international aspects, enacted under the Insolvency and Economic Rehabilitation Law, 5778-2018, entered into force on September, 2019 (the: “New Insolvency Law“).

Based on the Model Law on Cross-Border Insolvency developed by the U.N. Commission on International trade Law (UNCITRAL), Chapter 9 of the New Insolvency Law titled: “International Insolvency Proceedings” (“Chapter 9“) constitutes a dramatic change in the international aspects of Insolvency law in Israel, which is now providing effective mechanisms for dealing with cases of cross-border insolvency.

Chapter 9 applies where: (a) Assistance is sought in Israel by a foreign court or a foreign representative in connection with a foreign insolvency proceeding; or (b) Assistance is sought in a foreign state in connection with an insolvency proceeding conducted in Israel; or (c) Insolvency proceedings conducted in Israel and in a foreign state in respect of the same debtor are taking place concurrently; or (d) Creditors or other interested parties in a foreign state have an interest in requesting the commencement of, or participating in, an insolvency proceeding in Israel.

The New Insolvency Law adopts the principal of foreign representatives’ direct access to the Court, thus freeing the foreign representative from having to meet formal requirements such as licenses or consular actions in order to access the Israeli Court.

One of the key precedent provisions enacted under Chapter 9 establishes simplified procedures for recognition of foreign insolvency proceedings, including the effects of recognition of a foreign main and non-main proceeding, and relief that may be granted by the court in Israel upon application for recognition of a foreign proceeding.

According to Chapter 9, upon recognition of a foreign proceeding that is a foreign main proceeding, repayment of the debtor’s debts is stayed; commencement or continuation of actions or proceedings concerning the debtor’s is stayed; and the right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.

In addition, upon recognition of a main or non-main foreign proceeding, a comprehensive range of discretionary reliefs can be granted by the Court, including the authorization to manage and/or realize and distribute all or part of the debtor’s assets located in Israel; order the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor, and granting any additional relief available under the New Law with regard to insolvency proceedings.

Just recently, Adv. Lior Dagan, Adv. Sivan Lev and Adv. Nadav Shefer of our Insolvency Department applied to the Court in Israel, on behalf of foreign liquidators, with applications for recognition in 12 Australian  liquidation proceedings, in what seems to be the first recognition applications in accordance with Chapter 9 of the New Insolvency Law ever filed with the Court in Israel. The Court ordered the recognition in the 12 Australian main insolvency proceedings and further granted the Australian liquidators with the power to manage the companies’ assets in Israel.

Following these recognition orders, the Court granted the Australian liquidators with investigative powers in relation to the companies’ former directors who reside in Israel, and ordered certain Israeli lawyers who represented part of the companies under liquidation to produce and deliver information and documents to the liquidators.

In addition, the New Law enacted provisions in respect of concurrent insolvency proceedings regarding the same debtor, including provisions with regard to the creditors’ rights and the rule of payment in such proceedings.

We are happy to answer any questions that you might have,

FWMK Insolvency Department

Written by Adv. Sivan Lev, associate in the Insolvency Department of FWMK.

* any of the above should not be deemed to replace legal advice.