How an Australian Owner Cleared an Israeli Company's 'In Violation' Status From Abroad

Result: An "in violation" designation lifted and the company restored to good standing, with back annual fees cut from about NIS 13,400 to a single year · Timeline: 3 months · Challenge: Years of unpaid fees left a dormant company flagged in violation · Authority: Registrar of Companies (Rasham HaChavarot) at the Israel Corporations Authority · Financial Impact: About NIS 11,700 in back fees waived

Background

A software developer in Melbourne had, back in 2016, registered a private company in Israel with a local partner to build an import platform. The partnership fell apart before the company traded a single shekel, he moved on to other work, and the company sat untouched. He assumed that an entity that never opened a bank account and never issued an invoice would quietly cease to matter. It did not. In early 2026 he decided to set up a fresh Israeli company for a new project, and the Registrar of Companies refused to register it. The reason came back through his Israeli accountant: he was listed as a director and shareholder of a company that had been declared "in violation of the law," and that flag now followed him. The old company had become a lock on the new one.

The Challenge

A private Israeli company owes two things to the Registrar every year, whether or not it does any business: an annual return and an annual fee. Miss them for long enough and the Registrar designates the company a "company in violation" (chevra mefarat chok). That status is not cosmetic. It blocks the company from registering changes to its own records, it can block the registration of liens, and it reaches the people behind the company. A director or shareholder of a violating company can be refused registration of a new company, which is exactly what happened here.

His company had gone eight years without a single annual return filed and without a single annual fee paid. The fees do not pause for a dormant company. They accrue year after year, and the Registrar can impose a substantial fine on top. What had started as a NIS 1,500-ish annual charge he never thought about had compounded into a five-figure liability attached to a company that had never earned a cent.

In Practice: Under Section 362A of the Companies Law 1999, the Registrar of Companies (Rasham HaChavarot) may declare a company that fails to file annual returns and pay its annual fees a "company in violation," impose a fine of NIS 8,570, and refuse to register a new company for anyone associated with the violating entity. The annual return itself is required under Section 141 of the same law. Our client's company carried eight unpaid years at roughly NIS 1,675 a year, close to NIS 13,400 in accumulated fees, plus exposure to the NIS 8,570 fine, and the designation was the direct reason his new company could not be registered.

The instinct of many owners in this position is to pay the accumulated fees in full just to make the problem disappear. That is often the most expensive way out, and in this case it was avoidable. The company had genuinely never operated, and Israeli law has a specific route for exactly that fact.

What We Did

The client was in Australia and had no intention of flying to Israel over a company he had already written off in his head. Everything was done remotely.

We began with authority. He signed a power of attorney in Melbourne, which we had apostilled by the Australian Department of Foreign Affairs and Trade so that the Registrar and the accountant would accept it, and couriered the original where an original was needed. With that in hand we could act on the company's behalf without him leaving Victoria.

Next we cured the filing failures. We brought the company's records up to date and filed the outstanding annual returns under Section 141, so the company was no longer in default on its reporting. That step alone is what allows the "in violation" status to be lifted once the fee question is settled.

The fee question was where the real saving sat. Because the company had never commenced trading, we did not pay the eight years of accumulated fees. We assembled a dormancy claim: the company's accountant produced confirmation of non-activity for each year in question, the client signed an affidavit as a serving director stating the company had not operated, and we verified the affidavit as attorneys before submitting it to the Registrar. On that basis the Registrar waived the annual fees for the inactive years, leaving effectively a single year's fee to settle rather than the full NIS 13,400. One caution matters here and we checked it carefully: this waiver is available only where the company was genuinely inactive throughout the period claimed. Had it traded and then stopped, the dormant years between activity would not have qualified. His company had never traded at all, so the whole stretch qualified.

Once the returns were filed and the reduced fee was paid, we asked the Registrar to remove the "in violation" designation. With the company back in good standing, the block on registering his new company fell away. We then set out his two options for the old shell: keep it in good standing at the cost of the annual fee going forward, or close it cleanly by voluntary strike-off now that it was compliant. He chose to wind it down, and the route for that is covered in our guide to closing an Israeli company by voluntary liquidation.

One practical point shaped the timing. The annual fee runs on a two-tier basis: a reduced rate of around NIS 1,120 for a company that pays in the first quarter of the year, and the higher figure after that. For a company being brought back into good standing the gap is minor, but for the client's new company going forward it is money left on the table every year the fee is paid late. We set a March reminder so the new entity would never drift toward the same violation the old one had earned.

In Practice: A company that never operated can apply to have its accumulated annual fees waived by filing an affidavit of inactivity supported by its accountant's confirmation for each dormant year, signed by a serving director and verified by an attorney, under the fee rules administered by the Registrar of Companies. For our client this cut the liability from close to NIS 13,400 down to roughly NIS 1,675. The Registrar processed the returns, the waiver, and the removal of the violation flag over about ten weeks from submission, and the whole matter was handled from Australia on an apostilled power of attorney with no travel to Israel.

The Outcome

The "in violation" designation was removed and the company returned to good standing about three months after we were instructed. The accumulated fees came down from close to NIS 13,400 to a single year, a saving of roughly NIS 11,700, and the exposure to the NIS 8,570 fine was resolved once the company was compliant. Most importantly for him, the block lifted, and his new Israeli company was registered without further objection. He then elected to strike off the old shell so that it would never generate another fee or another flag.

He had come to us thinking he faced a large bill and possibly a trip to Israel to sort out a mistake from a decade earlier. He paid a fraction of what he expected and never left Melbourne.

Key Takeaways

What this case illustrates for non-residents who left an Israeli company behind:

1. A dormant Israeli company does not fade away, and its unpaid fees follow you. Annual returns and annual fees accrue whether or not the company trades. Ignoring the company converts a small yearly charge into a five-figure liability and an "in violation" flag that can block your other Israeli plans.
2. The violation status reaches the people behind the company. Being a director or shareholder of a company in violation can stop you registering a new company. If a fresh Israeli registration is suddenly refused, look at your old entities first.
3. A company that never traded can have its back fees waived, not just paid. An affidavit of inactivity, backed by the accountant's confirmation for each dormant year, can cut years of accumulated fees to almost nothing. Paying the full accrued amount is usually the wrong first move.
4. This is remote work. An apostilled power of attorney lets an Israeli lawyer file the returns, run the dormancy claim, clear the flag, and even strike the company off, without the owner leaving their own country.

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Facing a Similar Situation?

If you registered an Israeli company years ago and are not certain what became of it, it is worth checking its status before it surfaces at an inconvenient moment, such as when you try to register something new. Whether the right move is to revive it, clear its record, or close it for good depends on whether it ever traded and what you plan to do in Israel next.

Contact us for a confidential consultation about an Israeli company you own or once registered.