By Amit Acco, Partner |
Under Israeli law, a company that is operating in Israel needs to have a valid registration. There are several types of companies in Israel, and the decision regarding the correct type of company defers due to several factors such as tax, activity, HQ location, global structure, etc. The below info does not provide sufficient information to determine what is the preferred type of company.
The following are the main types of available companies:
Private or Public Company
A company may be registered as a “Private Company” or a “Public Company” with securities registered on a Stock Exchange. Both types of companies must present annual reports, including audited financial statements to their shareholders.
- A private company, consisting of 1-50 shareholders, and one director, may not offer or sell debentures or shares to the public and its Articles of Incorporation must contain restrictions on the transferability of its shares.
- A public company, with a minimum of 7 shareholders, may offer stock or debentures to the public, but only after issuing a prospectus following the requirements of the ICO and the Securities Law. Also, a public company is obliged to publish an annual report that includes the audited financial statements and directors’ report, all to be filed with the Companies Register where they are available to the public.
- Foreign Company: A company incorporated overseas may establish a branch or local office in Israel as long as it is registered as a foreign company with the Companies Registrar within a month of its establishment.
If the company uses the term “limited” as part of its name, then it must display its name and the name of the country in which it is incorporated in every invoice, letter, announcement, advertisement, or other official publication.
To register, a foreign company must submit all the necessary documents to the Companies Registrar. There is no requirement to publish the financial statements of a private company.
Work Visas, HR Companies, and Company Sponsorship
The need to apply for a work visa in Israel per se does not require the company to be registered in Israel. The sponsorship can be done by a foreign company. Attached please find a copy of the forms needed to be filled by the sponsor of foreign experts in Israel. These forms specific for this sector, are frequent changes and will require an update upon specific case initiation.
As a principle, an HR company in Israel needs to be registered in Israel as such.
Moreover, to be able to sponsor applications for foreign nationals it must be specially designated as a company that is allowed by the Israeli government to provide foreign nationals HR services. The law provides several options for such registration, depending on the type of industry the company will serve.
By illustration, an HR company can not for example apply for foreign experts and place them upon entry to work for employer X. In this scenario employer X needs to sponsor the application (please see below remark rather than the HR company.
For example, the companies that are authorized to engage in bringing in, brokering, and caring for foreign workers in the healthcare industry in Israel are manpower companies that have been licensed to engage in bringing in foreign workers and placing them. There is a distinction between nursing companies that deal with the placement of Israeli caregivers and the provision of nursing services to those entitled to the Nursing Law, and HR companies that deal with the whole issue of employing foreign workers. The formal name of the manpower companies is “Private Bureaus”.
Similarly, there are Private Bureaus for Agriculture employees, Construction employees. Etc.
Employer Sponsorship: a sponsoring company in the work permit context, means the company which will be legally and officially responsible for the foreign experts while working in Israel, including undertaking and execution of the obligations under Israeli labor law in general, in particular for paying them the required salary (which is as twice as the average salary in Israel), arranging for them the medical insurance, providing them with adequate housing, undertake that they will leave Israel once completing their work and other obligations, a human resources company (“HR” Companies), either based in Israel or abroad, employing staffed workers cannot sponsor work authorization applications to work at client sites.
Application for HR services
When an employer works with a contractor, a relationship triangle is formed – the employee, the contractor, and the employer (service recipient). these relationships are anchored in agreement systems: first agreement, employment agreement between employee and contractor, and second agreement, a contract between the contractor and the employer (service recipient).
A manpower contractor must enter into an employment agreement regulating the terms of employment of the employee, and the contractor must deliver this agreement to the employee, before the commencement of employment (unless the employee is subject to a collective agreement regulating these terms).
An organization or business wishing to contract with a manpower contractor or service contractor must contract with a contractor who has a license to provide foreign nationals HR services. Among the requirement for such registration is the need to appoint an HR specialist with years of experience in the local labor market.
Obtaining the license is a process done in front of the Ministry Of Interior, and it includes preparing documents, checking the background of the license applicant, and how the license applicant conducts himself towards his employees, that is, supervising the observance of employees’ social rights. This is a process that can take about three months.
As a deterrent, the law provides for criminal punishment for anyone who acts as a contractor without a license, as well as for anyone who has ordered services from a contractor who has acted without a license. The Regulation and Enforcement Administration oversees the duty to comply with the law and filing lawsuits is a matter of routine.
KTA will be able to advise further and provide legal services if needed.