How a US Parent Recovered NIS 1.24M on Assigned Israeli Invoices

Result: NIS 1,240,000 collected on an assigned Israeli receivable · Timeline: 11 months · Challenge: Hebrew no-assignment clause and a competing bank charge · Authority: Tel Aviv Magistrates Court · Financial Impact: NIS 1,240,000

Background

A technology group incorporated in Delaware decided in late 2024 to close its Israeli sales subsidiary. The subsidiary had one significant unpaid customer, an Israeli systems integrator that owed NIS 1,680,000 across fourteen invoices for hardware delivered between March and September 2024. Rather than leave the debt inside a company they were about to dissolve, the group's US counsel had the subsidiary assign the receivable to the American parent. The parent had no office in Israel, no Israeli bank account, and no employee who had ever met the debtor. When the first demand letter went out from Boston, the integrator replied in Hebrew that it recognised no debt to a foreign company it had never contracted with.

The Challenge

Two problems sat on top of each other. The first was contractual. The framework supply agreement between the Israeli subsidiary and the integrator was in Hebrew and contained a clause prohibiting transfer without prior written consent, which is exactly the exception Section 1(a) of the Assignment of Obligations Law 5729-1969 preserves. The statute makes a right assignable without the debtor's agreement as a default, then gives that default away where the contract says otherwise, and Israeli commercial agreements say otherwise as a matter of routine. The debtor's lawyers led with the clause and treated it as the end of the discussion.

The second problem was priority. Section 4 of the same statute gives a competing assignment to whoever came first, and the subsidiary had banked with an Israeli bank that takes an assignment by way of security over trade receivables as standard. A charge like that is registered at the Registrar of Companies, and under Sections 178 and 179 of the Companies Ordinance 5743-1983 a charge that misses the twenty-one day registration window is void against a liquidator. Here the registration existed. If the bank still held it, the parent had bought a claim that belonged to someone else. Add a foreign plaintiff with no Israeli presence, and the integrator had every reason to believe that a lawsuit would either never be filed or would collapse on the security-for-costs application before it reached evidence.

In Practice: Under Section 1(a) of the Assignment of Obligations Law 5729-1969 a contractual right passes without the debtor's consent unless law, nature or the contract restricts it, Section 2 leaves the debtor every defence and set-off he held against the original creditor, and Section 4 gives priority to the earlier of two assignments. A charge by way of assignment granted by an Israeli company binds a liquidator only if registered at the Registrar of Companies within 21 days of creation under Sections 178 and 179 of the Companies Ordinance 5743-1983. On this file the register search took two working days and cost under NIS 100, and it decided whether a NIS 1,680,000 claim was worth filing at all.

What We Did

The clause came first, because nothing else mattered if the assignment was bad. We read it in Hebrew against the rest of the agreement and found it prohibited transfer of "this Agreement" and of the rights and duties under it. That wording covers the contractual relationship going forward. It does not, on the Israeli case law we relied on, reach a crystallised money debt for goods already delivered, accepted and invoiced, where nothing remains for either side to perform. We wrote the opinion out in full before doing anything else, because a foreign client about to spend money on an Israeli lawsuit is entitled to know where the weak joint is. Our view was that the point was strong but not certain, and we put a number on it.

Then the register. A search at the Registrar of Companies produced the bank's charge from 2018 and, four pages later, a discharge filed in March 2023 when the subsidiary repaid its credit line. The bank confirmed in writing within nine days that it claimed nothing. That single letter converted a speculative claim into a collectable one, and it is the step foreign creditors most often skip.

Notice was the third piece. Israeli law does not make notice to the debtor a condition of a valid assignment, but a debtor who pays the original creditor in good faith before he learns of the transfer discharges the debt, and the subsidiary was weeks away from being struck off. We served a formal notice of assignment in Hebrew on the integrator's registered office and on its finance department, attaching the deed of assignment, and we did it before the dissolution filing rather than after, so that the payer had a live counterparty to acknowledge.

The claim was filed in April 2025 at the Tel Aviv Magistrates Court, which under Section 51 of the Courts Law [Consolidated Version] 5744-1984 hears money claims up to NIS 2,500,000. The parent sued in its own name as assignee. The ad valorem fee came to NIS 42,000, of which NIS 21,000 was paid on filing and the balance fell due up to twenty days before the hearing date. The integrator applied within a month for security for costs under Regulation 157(a) of the Civil Procedure Regulations 5779-2018 on the ground that the plaintiff was a foreign company with no assets in Israel, and the court ordered NIS 40,000 deposited. We had told the client to budget for this in February. Clients who learn about it from the court's decision usually lose two months arguing about it.

In Practice: A foreign plaintiff suing in Israel should expect an application under Regulation 157(a) of the Civil Procedure Regulations 5779-2018, and awards on a mid-sized commercial file commonly land between NIS 20,000 and NIS 50,000; here the Tel Aviv Magistrates Court ordered NIS 40,000 within five weeks of the application. The court fee is 2.5% of the amount claimed, half on filing and the balance up to 20 days before the hearing, and Regulation 15 of the Courts Regulations (Fees) 5767-2007 refunds the unpaid balance where the case ends in compromise before the end of the third pre-trial session, less a fixed deduction.

The defence, when it came, was the one Section 2 always produces. The integrator raised set-off for a batch of switches it said had failed on installation, valued at NIS 310,000, and for NIS 130,000 of credit notes the subsidiary had promised verbally and never issued. Both defences would have been available against the Israeli subsidiary, so both were available against the American parent. We obtained the subsidiary's service records from a former employee in Petah Tikva who had kept them, which showed nine of the fourteen reported failures had been repaired under warranty and closed. The credit notes were harder, because the manager who promised them no longer worked for either company.

Settlement discussions opened at the second pre-trial session in November 2025. We had a Boston general counsel on a video link at 5pm Israel time and an Israeli judge who wanted the file gone, which is a workable combination. The parties signed in December 2025 at NIS 1,240,000, payable in three instalments, with the integrator conceding the warranty batch and the parent conceding the credit notes in full.

The Outcome

The final instalment cleared in January 2026, eleven months after we were first instructed. The parent received NIS 1,240,000 of a NIS 1,680,000 book debt, recovered its NIS 40,000 security deposit on the consent judgment, and had the unpaid balance of the court fee refunded under Regulation 15 because the compromise came before the third pre-trial session closed. Legal costs on the Israeli side ran to roughly NIS 78,000 including the register searches, the Hebrew notice and the translations.

Moving the money to the United States needed one more step that surprises American clients. The receiving bank in Israel would not release the funds abroad until it held a withholding confirmation, because Section 170 of the Income Tax Ordinance requires deduction at source from certain payments to non-residents. Our accountant filed for an approval on the basis that the sums represented payment for goods supplied by an Israeli company whose profits had already been assessed in Israel, and the Israel Tax Authority issued the confirmation in about three weeks. On the American side the group's tax counsel treated the assignment as a distribution in kind from the subsidiary before dissolution and reported the collection accordingly. Neither side had a surprise, which is the only acceptable result on a cross-border collection.

Key Takeaways

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

1. Read the Hebrew clause before you buy the debt, not after. Section 1(a) of the Assignment of Obligations Law 5729-1969 hands the drafting the power to block an assignment, and a translated summary of an Israeli supply agreement will not usually tell you whether the prohibition reaches an accrued money claim or only the contract as a going relationship.
2. Search the Registrar of Companies charges register before filing. Section 4 gives priority to the first assignment, an Israeli bank's security over receivables is ordinary rather than exceptional, and a two-day search costing under NIS 100 tells you whether you own what you think you own.
3. Notify the Israeli debtor in Hebrew and in writing, and do it while the assignor still exists. A payment made in good faith to the original creditor before notice discharges the debt, and a dissolved Israeli subsidiary cannot hand the money on.
4. Price the security-for-costs order into the decision to sue. Regulation 157(a) exists precisely because the plaintiff lives abroad, and NIS 20,000 to NIS 50,000 tied up for the life of the case changes the arithmetic on any claim under about NIS 300,000.
5. Expect the set-off you never heard about. Section 2 transfers the debtor's defences with the debt, so the diligence that matters is not the invoice file but the service and complaints history behind it.

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Facing a Similar Situation?

If a group company, a lender or a factoring arrangement has left you holding an Israeli receivable, the questions that decide recovery are answered in the contract, the charges register and the notice you send, usually before a claim is drafted. We check all three and tell you what the debt is realistically worth in Israel. Our guide to enforcing an Israeli judgment in the United States covers what happens after judgment, and our answer on assigning Israeli contract rights and obligations as a non-resident sets out the statutory framework in full.

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