By Amit Acco, Partner |

Corporate mergers and acquisitions and the impact on foreign nationals employees who require B-1 work visas in Israel can sometimes be a very complex are due to immigration and corporate law.

Dissolutions and Transfer of Employees: Is There an Automatic Successor?

I. General

Under Israeli law, a foreign national must have a B-1 work visa to be allowed to work in the country.

Before any M&A, timely attention should be given to the company’s foreign workforce, to allow a legal determination of the legal steps that are required to ensure continuity of employment throughout the M&A process and thereafter.

As the Israeli law caters to one work visa type, the B-1 work visa, there is a need to determine which process was taken to obtain the visa, to allow the correct process of continuity:

  • B-1 work visa that was obtained by the individual employees (employee-sponsored work visa); or
  • B-1 work visa that was obtained by the pre-M&A company (employer-sponsored work visa).

As a general rule, while the employer-sponsored work visa allows the employee to work for any employer, the employer-sponsored work visa allows the foreign national to work for the specific employer that has successfully applied for the work visa, at a specific location and job title.

As a result, the need to apply for a change of employer for the post M&A structure will need to be legally examined in cases where the B-1 work visa of the foreign nationals are of employer-sponsored visas type.

II. Transfer of business

There are several options for the M&A structures. The following are the main ones:

  • Change of ownership only (employer keeps the same name, same corporate structure, same location, and same activity): There is no need to perform any action to allow work continuity.
  • Change of company name: There is a need to apply for the change of employer name at the Ministry of Interior
  • Change of corporate structure, location, or activity: There is a need to apply for the change of employer name at the Ministry of Interior

III. Legal consequences from an employment law perspective

Employees‘ employment rights are protected under Israeli law in cases of M&A (business transfer or takeover).

According to Israeli law, the employees (Including foreign nationals on B-1 work visas) do not have to agree to be transferred from one employer to another and accordingly, they can notify their refusal. In such a case, the previous employer, will dismiss the employees and pay them their rights, subject to a hearing procedure and by the binding conditions.

Employees who choose to continue working will continue as usual: their employment agreements will remain in effect. The only change is that the acquiring company will become their employer for all intents and purposes and will be responsible for all their rights to the first day of work.

IV. Legal consequences from an immigration law perspective

In case of a need for a new work visa application to be submitted by the post-M&A employer:

  • Application by the new company must be submitted before the M&A.
  • Failure to successfully apply for a continuation B-1 work visa (non-continuation of a work visa) will terminate the visa validity and employment of the foreign national on the M&A effective date.
  • In case of termination of employment due to non-continuation of the B-1 work visa, the foreign nationals and dependents will need to immediately depart from Israel.

Spin-Offs and Reorganizations: Still Part of the Same Family?

V. Spin-Off

In a spin-off, the original employer’s legal entity remains in existence. In such a case, only part of the company is transferred to newly established companies.

In case the employee will be transferred to the new entity that is spun off from the original company: the same rules above in IV, i.e. the spun-off company will need to ensure continuity of the B-1 work visa by applying for a new B-1 work visa.

In case the foreign national will be continued working for the original legal entity that applied for his work permit: there is no need for any actions to be made, and the foreign employee is harmless unless there is a significant change in the job description.

VI. Office and Plant Closures: What to Do with Affected Employees

The termination of the employment relationship with the Israeli employer, as a result of an office and/or plant closure, has the following effects.

Under the work permit obligations, the employer has to notify the Ministry of Interior immediately upon termination of employment of the foreign national (Employer-sponsored B-1 work visa).

The foreign nationals have to depart Israel immediately unless a new work visa has been successfully applied for and obtained for him by another employer (visa continuity).

Failure to comply with this obligation can lead to deportation of the foreign nationals and dependents from Israel.

VII. How to Successfully Manage Cross-Border Acquisitions

From a German immigration perspective, these points should be observed within a cross-border acquisition:

  • Plan ahead, at least 3 months before the M&A effective date.
  • Make a list of all foreign nationals with a B-1 work visa.
  • Secure copies of all foreign nationals’ work permits and visas.
  • (The merged company or purchasing company): Conduct an audit to make sure adherence of the current pre-M&A employer to all Foreign Employees Laws and Regulations. Such an audit can be made by Kan-Tor & Acco.
  • Examine the visas with an immigration lawyer to determine if the foreign nationals’ visas are B-1 employee-sponsored work visas or employer-sponsored work visas.
  • Determine, if the cross-border acquisition will affect the B-1 work visa of the foreign nationals.
  • (Where relevant): the post-M&A entity should Apply at least 3 months before the effective date of the M&A for B-1 work visas for the affected foreign nationals.