Corporate Demerger in Israel: Procedures – Cosmos Legal Guide

Israel is one of the most important commercial hubs in the Middle East, with a strong legal system and advanced capital markets. Companies may need to undergo restructuring from time to time to implement growth strategies. One of these restructuring methods is a corporate demerger or spin-off.

Legal Framework
Corporate demergers in Israel are primarily governed by the Companies Law, 5759-1999. This legislation allows companies to restructure their assets, separate different business lines, and achieve a more flexible corporate structure.

Types of Demergers:

• Full Demerger: All assets of the company are transferred to a new company, resulting in the dissolution of the existing company.

• Partial Demerger: Only specific business lines or assets are transferred to establish a new company or to integrate into an existing company.

Corporate Demerger Process in Israel

1. Preparation of the Demerger Plan

   • The board of directors prepares a detailed plan including the rationale for the demerger, assets to be transferred, allocation of liabilities, shareholders’ new status, and the commercial purpose of the demerger.

2. Approval by the General Assembly

   • The demerger plan is presented to the company’s shareholders. Israeli law typically requires a special majority for approval.

3. Protection of Creditors

   • After the demerger decision, the company’s creditors are notified. Creditors have a certain period to file objections to protect their rights.

4. Registration with the Companies Registrar

   • The demerger plan and general assembly resolution are registered with the Companies Registrar in Israel. Upon registration, the demerger becomes legally effective.

5. Establishment of a New Company (if applicable)

   • If the demerger results in a new company, the incorporation process is carried out separately and registered with the trade registry.

6. Tax and Financial Implications

   • Corporate demergers in Israel have significant financial and tax implications. According to the Income Tax Ordinance, demerger transactions must be carefully planned to avoid serious tax liabilities.

Role of Cosmos Legal Law Office in Corporate Demergers
Cosmos Legal provides professional legal support for corporate demergers in Israel, including:

• Preparation of the demerger plan

• Obtaining general assembly approvals

• Managing communications and legal processes with creditors

• Registration with the Companies Registrar

• Advising on tax and financial obligations

• Facilitating the incorporation of new companies

Conclusion
Corporate demergers in Israel are a crucial legal tool that enables companies to become more effective, flexible, and focused. However, the legal, financial, and tax aspects must be carefully managed. Cosmos Legal Law Office serves as a trusted partner for companies operating in Israel, ensuring the demerger process is conducted smoothly and securely.