Company liquidation: voluntary liquidation, an expedited procedure or insolvency

Information center: Debts and enforcement proceedings: what to do, and in what order — for debtors and businesses.

This guide is a general information guide. The office does not handle company liquidation proceedings.

Official information on company liquidation: the Registrar of Companies (voluntary liquidation and expedited liquidation), and the Commissioner of Insolvency and Economic Rehabilitation Proceedings (the Official Receiver) when the company cannot pay its debts.

Two tracks, according to the company’s situation

Since the 2018 reform there has been a clear separation. Liquidation of a company that can pay its debts is governed by Part Eight A of the Companies Law, 5759-1999. An insolvent company is dealt with under the Insolvency and Economic Rehabilitation Law, 5778-2018, which applies to proceedings opened from 15 September 2019; liquidation proceedings under the Companies Ordinance that were pending on the eve of commencement continue to be governed by the previous law (section 373). When a company is insolvent, liquidation proceedings under the Companies Law are not started for it (section 342D(a) of the Companies Law).

• Insolvency is a situation in which the debtor cannot pay its debts on time, whether or not they have fallen due, or its liabilities, including future and contingent ones, exceed the value of its assets (section 2 of the Insolvency Law).
• Voluntary liquidation: for a solvent company, by a resolution of the shareholders and managed by a trustee whom they appoint.
• Expedited liquidation: for an inactive company, by an application to the Registrar of Companies, without a trustee.
• Liquidation by the court under the Companies Law: for a solvent company, when the company has decided on it by a special resolution, when it did not start its business within a year of registration or stopped it for a year, or when it is just and equitable to liquidate it (section 342F). The application is filed by the company or a shareholder, and in certain circumstances by the Attorney General (section 342G).
• Insolvency proceeding: for a company that cannot pay, in court, managed by a trustee whom the court appoints.

Voluntary liquidation of a solvent company

1. Solvency affidavit. All or most of the directors declare that they have examined the state of the company’s business thoroughly and that, in their opinion, it can pay its debts in full within 12 months from the start of the liquidation (section 342Y). Without such an affidavit there is no voluntary liquidation (section 342X).
2. General meeting. It is convened within 90 days of the affidavit, and the affidavit is attached to the notice of the meeting (section 342Z). The resolution is a “special resolution”: a majority of three quarters of the votes of those taking part in the vote, notice 21 days in advance (or a shorter time with the consent of all the shareholders), and a proposal to liquidate on the agenda (section 342A).
3. Appointment of a trustee. The meeting appoints a trustee and may set the trustee’s remuneration, provided that the remuneration does not lead the company into insolvency (section 342AA). On the appointment, the powers of the board of directors and the general manager pass to the trustee, unless the meeting decided otherwise (section 342EE(b)).
4. The company stops operating. The liquidation starts with the resolution, and from that moment the company conducts its business only as far as needed for the liquidation (section 342BB).
5. Notices. Within 21 days of the resolution, the trustee gives written notice to the known creditors, including those whose debt is disputed (section 342CC), and sends the Registrar a notice with the affidavit (section 342DD).
6. The trustee’s work. The trustee decides on the proofs of debt, collects the assets, pays the debts and distributes the balance to the shareholders (section 342EE(a)). Before paying the creditors, the trustee publishes a notice and gives creditors whose claim has not yet been decided time to establish it (sections 342P and 342HH).
7. The company turns out to be in a state of insolvency? The trustee notifies the shareholders and the creditors, and if the conditions are met, files an application on the company’s behalf for an order to open proceedings (section 342D(c)).
8. Completion. The trustee prepares a final report and convenes a general meeting, with notice sent a month in advance; within seven days of the meeting, the trustee sends the Registrar the minutes and the report (section 342LL). If the company has no remaining debts to the Registrar for fees, the Registrar registers the dissolution of the company. The company’s documents are kept for at least seven years (section 342MM).

Expedited liquidation of an inactive company

An “inactive” company is a company that has no assets, has no debts (except an annual fee from which it may get an exemption), and has no pending legal proceedings to which it is a party or administrative enforcement proceedings against it (section 342OO). Such a company can pass at the general meeting, with the consent of all the shareholders taking part, a resolution on voluntary liquidation by an expedited procedure (section 342PP), and file an application with the Registrar within 30 days, with an affidavit by all or most of the directors and a resolution to keep the documents for at least seven years (section 342QQ). The Registrar publishes a notice on the Ministry of Justice website (section 342RR); anyone who may be harmed may object within 90 days (section 342SS); and if there is no objection, the Registrar registers the dissolution of the company at the end of 10 business days from the last date for objection (section 342UU).

An insolvent company: the proceeding under the Insolvency Law

• Who files: the company, a creditor or the Attorney General (section 6). A company may file when it is insolvent or when the order will help prevent insolvency, and its total debts exceed NIS 29,487.18 (in 2026; section 7(a)).
• A creditor’s application: the company is presumed to be in insolvency if, for example, a creditor demanded from it in writing a debt of more than NIS 88,461.56 (in 2026), stated that it would file an application, and the debt, which is not disputed in good faith, was not paid within 30 days (section 10(a)(1)).
• Rehabilitation or liquidation: in the order to open proceedings, the court orders the company to be operated for the purpose of its rehabilitation, if there is a reasonable chance of rehabilitation, no reasonable concern of harm to the creditors, and financing; otherwise, it orders its liquidation (section 23).
• Freeze of proceedings: after the order, collection proceedings for past debts cannot be opened or continued, an attachment cannot be imposed on the company’s assets, and a legal proceeding against it cannot be continued without the court’s approval (section 29). The freeze period is not counted for the purpose of the limitation period (section 32).
• The trustee reports: a periodic report to the court and to the Commissioner of Insolvency Proceedings (“the Commissioner”), at least once a year, and any interested party may inspect it (section 53).
• Setting aside acts that preceded the proceeding: the court may set aside a payment that preferred a particular creditor in the three months before the application (one year, when the creditor is a relative) (section 219), and an act that took an asset out of the company without adequate consideration in the two years before the application (four years, in favor of a relative) (section 220), subject to the conditions in those sections.
• Order of repayment: secured debts, the expenses of the proceeding, preferential debts, debts secured by a floating charge, general debts, additional interest, and deferred debts (section 231).
• Employees: a debt of wages and severance pay is a preferential debt, up to NIS 33,250 for wages and up to NIS 51,820 for wages and severance pay together (in 2026), less the benefit from National Insurance (section 234(a)(1)). After the order, the National Insurance Institute (Bituach Leumi) pays the employee a benefit for the wage and severance debt, up to 13 times the basic amount (sections 182 and 183(a) of the National Insurance Law [Consolidated Version], 5755-1995).

Proof of debt: what a creditor does

In an insolvency proceeding, a proof of debt is filed with the trustee within six months of publication of the order to open proceedings; the trustee may extend the deadline when the creditor could not file on time and it is just to do so (section 210(a), (c)). The proof sets out the debt, the linkage and interest, and the documents, and a holder of a fixed charge also sets out the charged asset and an estimate of its value (section 210(d)). The trustee examines the proof and decides whether to approve or reject it (section 211), and anyone harmed by the decision may appeal to the court (section 215). In voluntary liquidation, the proof is filed with the trustee that the company appointed, and the trustee decides on it (section 342EE(a)(1) of the Companies Law).

The liability of directors and officers

• They did not act to reduce the insolvency: if a director or general manager knew, or should have known, that the company was insolvent and did not take reasonable measures to reduce its extent, the court may, at the request of the trustee or the Commissioner, make them liable to the company for the damage caused to the creditors (section 288(a)). They are presumed to have taken reasonable measures if they assessed the company’s situation and acted to obtain help from professionals in rehabilitation, to negotiate a debt arrangement, or to open insolvency proceedings (section 288(b)). The company may not exempt them from this liability or provide in its articles that it will indemnify them for it (section 288(c)), and they are exempt if they relied in good faith, and reasonably, on information that the company was not insolvent (section 288(d)).
• Breach of duty: an officer, a promoter or another functionary who breached a duty toward the company may be ordered to compensate, to pay or to return an asset, at the request of the trustee or the Commissioner (section 289).
• Fraudulent management: an officer who was knowingly a party to managing the company fraudulently may be liable for the damage, and may be disqualified from serving as an officer for up to five years (section 290).
• In voluntary liquidation: the solvency affidavit is a sworn statement by the directors that they have examined the state of the company thoroughly (section 342Y). So it is checked against numbers, not against a feeling.

Frequently asked questions

How long does it take to liquidate a company?

It depends on the track. In expedited liquidation of an inactive company, the Registrar publishes the application, and if no objection was filed within 90 days, it registers the dissolution of the company at the end of 10 business days (sections 342RR–342UU of the Companies Law). In voluntary liquidation and in an insolvency proceeding, the duration depends on the assets, the creditors and the disputes; the Law requires the trustee in voluntary liquidation to act as quickly as possible (section 342EE(a)).

Can a company that has debts be closed?

Expedited liquidation is possible only for a company that has no debts and no assets (section 342OO of the Companies Law). Voluntary liquidation is possible for a company with debts, on condition that the directors declare that it can pay them in full within 12 months (section 342Y). A company that cannot pay its debts is liquidated in an insolvency proceeding in court.

What is a solvency affidavit?

An affidavit by all or most of the directors that they have examined the state of the company’s business thoroughly and that, in their opinion, it can pay its debts in full within 12 months from the start of the liquidation (section 342Y of the Companies Law). Without it, voluntary liquidation cannot be decided on, and it is attached to the notice of the meeting and to the notice to the Registrar.

A company in liquidation owes me money. How do I file a proof of debt?

In an insolvency proceeding, a proof of debt is filed with the trustee within six months of publication of the order to open proceedings, with details of the debt and the documents (section 210 of the Insolvency Law). The trustee decides whether to approve it (section 211), and the decision can be appealed to the court (section 215). In voluntary liquidation, the proof is filed with the trustee that the company appointed.

Is a director personally liable for the company’s debts?

Not automatically. But a director or general manager who knew, or should have known, that the company was insolvent and did not take reasonable measures to reduce the insolvency may be made liable to the company for the damage caused to the creditors, and the company cannot exempt them from this (section 288). An officer who was knowingly a party to fraudulent management may bear the damage and be disqualified for up to five years (section 290).

What happens to employees when the company is in insolvency?

A debt of wages and severance pay is a preferential debt, up to NIS 33,250 for wages and up to NIS 51,820 for wages and severance pay together (in 2026), less the benefit from National Insurance (section 234(a)(1) of the Insolvency Law). After the order, the National Insurance Institute pays the employee a benefit for the wage and severance debt, up to 13 times the basic amount (sections 182 and 183(a) of the National Insurance Law).

Who appoints the trustee in voluntary liquidation?

The general meeting that decided on the liquidation appoints the trustee, and may set the trustee’s remuneration, provided that the remuneration does not lead the company into insolvency (section 342AA of the Companies Law). On the appointment, the powers of the board of directors and the general manager pass to the trustee, unless the meeting decided otherwise (section 342EE(b)).