I am lending a significant sum to my nephew's Israeli business. Can I take security over Israeli assets from abroad, and how do I register it?

An unsecured family loan into Israel is a gift with optimistic paperwork. The security is not the hard part, and neither is being foreign; Israeli registries will record a lender in Sydney or Seattle without complaint. What defeats most of these arrangements is a filing deadline nobody diarised.

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Detailed Answer

Israeli law separates the promise from its priority. The loan contract binds the borrower whatever you do, but Section 4 of the Pledge Law 5727-1967 makes the pledge effective against third parties only where the asset has been delivered into the creditor's possession or the pledge is registered with the Registrar of Pledges (Rasham HaMashkonot), which sits within the Corporations Authority at the Ministry of Justice and operates under the Pledge Regulations (Registration and Inspection Procedures) 5754-1994. That register is declaratory. It records what the parties state and does not test whether the pledge is valid, which cuts both ways: registration is fast and cheap, and it is also no substitute for diligence on whether the asset is already encumbered. Where the borrower is a company the position doubles up. Sections 178 and 179 of the Companies Ordinance [New Version] 5743-1983 render a registrable charge void against a liquidator and against every creditor unless particulars and the creating instrument reach the Companies Registrar within 21 days of creation, and that deadline is not extended by goodwill. Land is different again. A charge over registered Israeli land is a mashkanta recorded at the Land Registry (Tabu) under the Land Law 5729-1969, not at the Registrar of Pledges; where the borrower's rights are still contractual because the project is not yet registered as a condominium, the practical answer is a pledge of the contractual right plus a caution (hearat azhara) noted against the file.

Doing all of this from abroad is routine, with three friction points worth planning for. Signature: an Israeli lawyer acts on a notarised and apostilled power of attorney, and the pledge instrument itself is drafted in Hebrew because that is the version the registry files. Money: the incoming transfer will be examined by the receiving bank under the Anti-Money Laundering Law 5760-2000 and by the Israel Tax Authority afterwards, and a registered pledge plus a written loan agreement answers both questions in a way an unexplained transfer never does, as our answer on lending money to an Israeli relative from Canada sets out on the loan terms themselves. Enforcement: a registered pledge is realised through the Execution Office (Hotzaa LaPoal) rather than by seizing the asset yourself, and the borrower is entitled to notice and to raise defences, so build a realistic timetable into your expectations rather than assuming self-help. Two habits distinguish the deals that hold up. Search the register before lending, not after, because a prior registered pledge takes priority over yours regardless of when the money moved. And register the same day the document is signed; the 21-day company clock is the single most common reason a family lender ends up ranking alongside the trade creditors.

In Practice: Section 4 of the Pledge Law 5727-1967 makes a pledge effective against third parties only on delivery of the asset or registration with the Registrar of Pledges (Rasham HaMashkonot), where the registration fee is about NIS 170 and an inspection costs roughly NIS 10. Sections 178 and 179 of the Companies Ordinance [New Version] 5743-1983 require a company charge to reach the Companies Registrar within 21 days of creation or it is void against a liquidator and other creditors. Registration is usually completed within 1 to 5 business days once the Hebrew instrument and an apostilled power of attorney are in hand, and realisation through the Execution Office on a defaulted registered pledge typically takes 4 to 12 months.

When to Consult a Lawyer

• The asset is land, an apartment or rights under a purchase contract, where the correct registry is the Land Registry rather than the Registrar of Pledges and filing in the wrong place leaves you unsecured
• The borrower is a company with a bank facility already in place, since the bank's floating charge and any negative pledge in its documents can rank ahead of yours or prohibit your security outright
• The loan is being advanced in tranches, because a pledge registered before the money moves and one registered afterwards can be attacked differently if the company later becomes insolvent

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Speak With an Israeli Attorney

An Israeli lawyer searches the registers before you lend, drafts and registers the Hebrew pledge or mortgage under your power of attorney, and meets the 21-day company filing deadline.

Contact us for a confidential initial consultation.