Israel Collection Profile

Israel
       

Israel

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Complexity of collecting debt:

grading
notable High Very High Severe


Executive summary

  • Payments in Israel are normally 60 to 90 days between domestic companies, but much less with foreign companies.
  • A recent reform in Israeli courts allows quick proceedings for lawsuits up to NIS 75K (€18K) and fast execution activities for cases up to NIS 50K (€12.5K). Despite this, significant delays, costs and difficulties must be expected when taking legal action and expecially in cross-border disputes. 
  • Israeli courts have significant difficulties in coping with the caseload, significant delays, costs and difficulties must be expected when commencing legal action. Cross-border disputes require further patience.
  • Various insolvency proceedings are available but in practice the chances of collecting debt when the debtor has become insolvent remain poor.
 
General Information GENERAL INFORMATION arrow-transparent
 
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
 
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
 
General Information 

GENERAL INFORMATION

Days Sales Outstanding (DSO)

Payments in Israel take 60 - 90 days between domestic companies but much less with foreign companies.  However, delays of 15 - 30 days can be expected when transactions are not secured. The paying behaviour of domestic companies changes from sector to sector.

 

Late payment interest

Late payment interest starting from the original due date is normally paid in Israel provided that a contract states that it should be paid, but the law provides no specific framework to this regard

Collection costs can only be charged to the debtor when a claim is filed with the court. In practice, such costs are however used as a means to exercise pressure but would rarely be paid.

 
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collection practice 

COLLECTIONS PRACTICES

Orchestrated negotiation first

Because the judicial system tends to be slow, amicable settlement opportunities constitute the strongest alternative to formal proceedings. Before starting legal proceedings against a debtor, assessment of assets is essential as it allows verification as to whether the latter is still active and whether recovery chances are at best. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed often becomes impossible to enforce a debt. Prior to initiating a formal dispute, it may also be worth considering whether the contract allows having foreign or arbitral tribunals.

 
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Court Proceeding 

COURT PROCEEDINGS

Given the complexity of conducting legal action in Israel, it is essential to first ensure that legal action only commences when all amicable negotiation opportunities have been exhausted. Various fast-track proceedings may also help solving payment issues without having to conduct an ordinary lawsuit. These are available when the claim is for certain and undisputed liquidated sums up to NIS 75,000 (EUR 18,000): in such a case, the plaintiff files the claim with affidavit, together with proof (documents) for the debt amount. The debtor has 45 days to file a defense with affidavit (there is no need to get the court's permission). Another fast way to receive money is a shorter process (injunction) which can be submitted directly to the Hotsa'a Lapoal; there is no limit on the claimed amount and it must e based on clear evidence which the debtor cannot deny (e.g.: an acknowledgement of debt signed by the debtor). If the evidence gets opposed, the debtor should apply for special permission from court in order to file a defense. If permission is given, the process will turn to an ordinay one; if not, a judgment will be made. Originating Motions proceedings rather aim at solving disputes affecting one's rights (i.e. ownership rights, creditor's status, etc.). An Ordinary proceedings must be based on claim facts accompanied by supporting documentation and the arguments of the plaintiff versus defender. When the option of commencing formal legal proceedings remains, a claim may be filed with the competent court (depending on the amount at stake) and the debtor must be served with a summons. The debtor must bring a defence within thirty days. The parties are given a chance to meet and exchange during a pre-trial hearing, which also provides them with an opportunity to settle the claim amicably. If no compromise is reached, the parties’ evidence and arguments are then examined. The court may render its decision once the evidentiary hearing has taken place and the parties’ summaries have been submitted. It should be added that, in practice, the parties may ask the court extensions of the time periods stated in law, which are often granted. Israeli courts may award remedies in the form of compensatory damages, mandatory or prohibitory injunctions and declarative decisions, but punitive damages are not allowed by law.​

 
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insolvency Proceeding 

INSOLVENCY PROCEEDINGS

Legislation on insolvent companies consists mainly of the Companies Ordinance of 1983 (as amended), the Bankruptcy Ordinance of 1980, and the Companies Law of 1999. Israeli law recognizes three main ways of dealing with insolvent companies: a voluntary arrangement between the company and its creditors, liquidation of the company and receivership. All insolvency proceedings may be initiated by either the debtor or its creditors, but in each types of proceeding the courts would tend to give priority to the creditors over the interests of the company and third parties.

 
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