An Israeli company owes my UK business money and has stopped paying. Can I force it into insolvency proceedings from London?

Most foreign suppliers reach for insolvency far too late, after eighteen months of promises and a debt that has stopped being worth chasing. Israeli law gives a creditor a fairly blunt instrument and gives it early. The application does not require you to audit the debtor or prove its accounts are underwater. It requires an unpaid demand of the right size, properly served, and thirty days of silence.

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Detailed Answer

The governing statute is the Insolvency and Economic Rehabilitation Law 5778-2018, in force since 15 September 2019, which replaced the old winding-up provisions of the Companies Ordinance. Section 7 lets a corporation apply for its own opening order where it is insolvent or where the order would help prevent insolvency and its debts exceed a linked figure currently around NIS 29,487. Section 9 is the creditor's route. A creditor may apply to the court for an order to open proceedings against a corporation on the ground that the corporation is insolvent, and a creditor whose debt has not yet fallen due may apply only in narrower circumstances, essentially where the debtor is acting fraudulently or concealing assets, or where the debt matures within six months. The reason the section works in practice is the presumption it carries. Where the creditor has served a written demand for a debt exceeding a linked amount, currently about NIS 88,461, and payment has not been made within 30 days, the company is presumed insolvent, and the burden shifts to it to rebut that. An unsatisfied judgment debt and a failed execution do the same work. Jurisdiction over a corporation lies with the District Court, and on opening proceedings the court appoints a trustee and can impose a stay that stops every other creditor collecting independently.

Being a foreign creditor changes the mechanics, not the entitlement. The application, the affidavit in support and the demand itself are filed in Hebrew, so an English invoice trail and correspondence need certified translation, and the demand should be served at the company's registered address as it appears in the Registrar of Companies file rather than at whatever address the sales contact was using. Your Israeli lawyer needs a power of attorney executed before a notary where you are and apostilled; where signed before an Israeli notary the fee is NIS 197 for the first signatory under the Notaries Regulations (Service Fees) 5738-1978. Be clear-eyed about the outcome. An opening order is frequently a lever rather than an end: the threat of a trustee examining the directors' conduct and unwinding preferential payments often produces a settlement that eighteen months of chasing did not. If it does proceed, an unsecured foreign trade creditor ranks behind secured creditors, employees and the tax authorities, and recovery is often modest. Where the company still has assets and the dispute is really about non-payment rather than genuine insolvency, an ordinary claim followed by execution is usually faster, and where you already hold a foreign judgment the recognition route is set out in our answer on how to enforce a US judgment against an Israeli company, which applies equally to an English one.

In Practice: Under Section 9 of the Insolvency and Economic Rehabilitation Law 5778-2018, a creditor applies to the District Court for an order to open proceedings against an insolvent company. A written demand for a debt above the linked threshold, currently about NIS 88,461, unpaid for 30 days, raises a presumption of insolvency; the company's own application under Section 7 needs debts above roughly NIS 29,487. Once proceedings open, a creditor proves its debt within six months of publication of the opening order under Section 210, and the trustee decides under Section 211. Allow two to four months from filing to a hearing on the application.

When to Consult a Lawyer

• The debt is disputed rather than simply unpaid. Using an insolvency application to collect a genuinely contested debt is an abuse of the process in Israeli practice, and a company that shows the dispute is bona fide will have the application dismissed with costs against you.
• Directors have been moving assets. Payments made to related parties in the three months before insolvency, and within a year where the recipient is a close party, can be clawed back under Section 219, and value-stripping transactions reach back two and four years under Section 220, but only a trustee can pursue them, which is often the real reason to open proceedings.
• You are one of several foreign creditors. Coordinating a single application costs far less than four parallel ones, and a group of trade creditors carries more weight with the court and with the company than any of them does alone.

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Speak With an Israeli Attorney

We serve the statutory demand correctly, file the Section 9 application in the District Court on behalf of foreign creditors, and press the trustee on preference and value-stripping claims where assets have already left the company.

Contact us for a confidential initial consultation.