How a French Supplier Recovered NIS 312,000 in an Israeli Insolvency

Result: NIS 1,040,000 admitted as an unsecured claim and NIS 312,000 paid out on distribution · Timeline: 19 months from statutory demand to dividend · Challenge: Trustee rejected a third of a foreign supplier's proof of debt · Authority: Economic Department of the Tel Aviv District Court and the appointed trustee (ne'eman) · Financial Impact: NIS 312,000 recovered on an unpaid EUR 296,000

Background

The client is a family-owned manufacturer of industrial filtration components based outside Lyon, selling into Israel since 2019 through a single distributor in the centre of the country. Payment terms were 60 days, the relationship had been unremarkable for five years, and then it was not. Between September 2024 and January 2025 fourteen invoices went unpaid, totalling EUR 296,000. The distributor's managing director answered emails for a while, then answered them slowly, then stopped. By February 2025 the French company had shipped a year's production against nothing, had no security, and was dealing with a debtor 3,000 kilometres away in a legal system it had never touched.

The Challenge

A foreign trade creditor's instinct is to sue at home and bring the judgment to Israel. That instinct is usually wrong once a debtor is genuinely failing, because a judgment obtained in month nine is worthless against a company that opened insolvency proceedings in month four, the recognition process described in our guide to enforcing a foreign judgment in Israel adds months of its own, and the cost of getting there is not recoverable. Our advice was to use the insolvency machinery from the start rather than the courts, and the Insolvency and Economic Rehabilitation Law 5778-2018 gives a creditor a specific lever for that. Section 9 lets a creditor apply for an order opening proceedings against a corporation, and the route runs through a written demand: serve the company with a demand for a sum above the statutory threshold, state the intention to apply, and if it goes unpaid for 30 days the ground is made out.

The harder problem was the shape of the claim itself. A French supplier's file is a French file. The framework contract, the general terms and conditions carrying the late-payment interest, the order confirmations, the delivery notes and the invoices were all in French, the accounting records sat in a French ERP system, and the person who could swear to any of it was a finance director in Lyon who had never given evidence anywhere. An Israeli trustee reviewing a proof of debt does not take a foreign creditor's word for the amount. He tests it against the debtor's own books, and where the debtor's books are incomplete, which in a failing company they always are, the gap tends to be resolved against the creditor who cannot fill it.

In Practice: Section 9 of the Insolvency and Economic Rehabilitation Law 5778-2018 lets a creditor petition for an order opening proceedings against a corporation after serving a demand for a sum exceeding NIS 88,461.56 which goes unpaid for 30 days. Corporate insolvency belongs to the Economic Department of the District Court, and here the demand served in February 2025 was answered not by payment but by the company filing its own petition, with the opening order and the appointment of a trustee (ne'eman) following in April 2025.

What We Did

The demand went out first, because it costs almost nothing and it forces a decision. It produced the decision we expected: the company petitioned for its own opening order six weeks later, which saved our client the cost of running the petition and put a trustee in place faster than a contested application would have.

Then we built the proof of debt (tviat chov). Section 210 of the Insolvency Law gives a creditor six months from publication of the opening order to file with the trustee, and a debt created after the order must be claimed within 45 days of arising or by the end of that six-month period, whichever is later. Six months sounds generous and is not, for a foreign creditor, because the file has to be assembled and translated before it can be sworn. We filed in July 2025, three months into the window, with the framework contract, all fourteen invoices, the matching order confirmations and signed delivery notes, a statement of account reconciled to the last payment received, and an affidavit from the finance director in Lyon.

The document chain is where these claims are won. Every invoice was tied to an order confirmation and a delivery note bearing an Israeli signature, and the whole bundle went into notarised Hebrew translation at a cost of NIS 11,400, which the client thought excessive until the trustee began comparing our delivery notes to the warehouse records. The finance director's affidavit was sworn before a notary in France and apostilled by that notary directly, at no charge, under the arrangement in force since 1 May 2025 that moved French apostilles from the courts of appeal to the notarial profession. A year earlier the same document would have taken weeks and a courier.

The trustee's decision came in January 2026 and admitted NIS 780,000 of a claim filed at NIS 1,184,000, the euro figure converted into shekels at the representative rate on the date of the opening order. He rejected NIS 404,000 on three grounds: four invoices whose goods he could not trace in the company's stock records, a credit note the debtor claimed had been agreed verbally, and the contractual late-payment interest under the French general conditions. We appealed to the District Court inside the 45-day window the law allows, which is short enough that a creditor abroad who waits to take advice loses the right rather than the argument.

The appeal did not go to judgment. At the hearing the court sent the parties to work through the four disputed shipments against the debtor's customs import declarations, which the trustee had not looked at, and three of the four appeared there in full. A further NIS 260,000 was admitted by consent, bringing the total to NIS 1,040,000. We conceded the contractual interest rather than litigate it, on the practical ground that interest admitted in an insolvency dilutes every other creditor and is resisted accordingly.

In Practice: Section 210 of the Insolvency and Economic Rehabilitation Law 5778-2018 requires a proof of debt to reach the trustee within six months of publication of the opening order, the trustee is expected to decide within 90 days of filing, and a creditor has 45 days to appeal the decision to the Economic Department of the District Court. On this file the decision took six months rather than three, and the appeal recovered a further NIS 260,000 of a NIS 404,000 rejection by producing the debtor's own import declarations.

The Outcome

Distribution was made in September 2026. The bank held a floating charge over the company's assets and was paid first, the expenses of the proceedings came next, and the preferred debts under Section 234 of the Insolvency Law took what was left before the ordinary creditors, that class being a closed statutory list covering employee wages and severance up to the ceiling and certain tax debts. Sections 231 and 232 set the order in which the insolvency fund is applied, and by the time it reached the unsecured class there were 30 agorot in the shekel. Our client received NIS 312,000, nineteen months after serving the demand.

Two French consequences followed. The client's credit insurer had cut the approved limit on this buyer to EUR 120,000 in mid-2024, months before the first missed invoice, and paid out on that limit alone, so a proportionate share of the dividend went back to the insurer under the recovery-sharing terms of the policy. The trustee asked for written confirmation of who was entitled to what before he would pay, which is a question no foreign creditor anticipates and which delays payment by weeks if the policy documents are not already to hand. Separately, the trustee's written decision and the distribution statement supported the treatment of the shortfall in the French accounts, because a documented insolvency dividend fixes the irrecoverable balance at a date and an amount rather than leaving it as a director's estimate.

The client's own conclusion was that the money was not the point. Recovering 26 per cent of an unpaid ledger after nineteen months is not a commercial success. What the file changed was how the company sells into Israel: letters of credit above a threshold, and a limit reviewed against the buyer's Israeli filings rather than against the relationship. Our guide to securing payment from an Israeli buyer as a foreign supplier covers the instruments available before the debt goes bad, which is the only stage at which a foreign supplier has real leverage.

Key Takeaways

What this case illustrates for non-residents in similar situations:

1. When an Israeli debtor is genuinely failing, stop suing and use Section 9 of the Insolvency Law. A statutory demand for a sum above NIS 88,461.56 that goes unpaid for 30 days either produces payment or produces an opening order, and both are better than a judgment against an empty company.
2. Six months under Section 210 is not long for a foreign creditor. Translation, notarisation and apostille of a full contractual chain take weeks before anything can be sworn, and a claim filed at the deadline gets the least sympathetic reading from the trustee.
3. The trustee tests your claim against the debtor's records, so bring documents the debtor generated. Signed delivery notes, order confirmations and, on imported goods, the debtor's own customs declarations do work that your invoices and statements cannot.
4. The 45-day appeal window against a trustee's decision is a hard deadline that runs while you are still reading a Hebrew decision. Budget for the possibility of a partial rejection when you file, rather than treating it as a surprise.
5. Tell the trustee about your credit insurer early. Where an insurer has paid and shares in recoveries, the trustee will want written confirmation of the split before releasing anything, and assembling that after the dividend is declared adds weeks.

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Facing a Similar Situation?

If an Israeli customer has stopped paying and you are weighing a claim in your own courts against something in Israel, the timing question comes before the forum question. A debtor sliding towards insolvency turns a foreign judgment into a piece of paper, while a properly documented proof of debt filed early keeps a foreign supplier in the same queue as every local creditor.

Contact us for a confidential consultation about your Israeli legal matter.