Private Equity Funds in Israel

As in many other countries, establishing PEFs in Israel is most often done in the form of LLPs. LLPs in Israel represent separate legal entities in which limited partners aren’t involved. General partners in such entities are responsible for their management & bear unlimited liability for their obligations.

General Information

Those interested in establishing a PEF in Israel should keep in mind that such structures aren’t government-regulated. The law regulating activities of investment advisors in Israel isn’t applicable to interests in privately owned companies. It should be kept in mind that obtaining a fund manager license in Israel requires being compliant with financial supervision laws & special licensing procedure.

Legal Requirements

According to the aforementioned laws, managing financial assets or extending credits is only allowed to licensed individuals or organizations. Licensing Israeli PEFs requires submitting multiple documents. Additional information may be required if a licensing authority believes that it’s necessary to verify a request for a license. If the information provided to a licensing authority has changed after obtaining a financial service provider license in Israel or issuing a loan lender license in Israel, licensees must inform licensing authorities of the changes within a 10-day period.

Israel: Establishing a PEF

Establishing an Israeli PEF requires determining which organization will be acting as a GP: 

• If the GP is an Israeli company, then the registration process will take less than thirty days & require preparing simple incorporation documents. 
• If a decision is made to register a new company in Israel, then the creation process may require more time.
• If the GP is an Israeli partnership, an application for registration must be submitted to the Company Register.

An application for the establishment of an Israeli PEF must also be filed with the Company Register.

How do Israeli PEFs Receive Funding?

Israeli PEFs typically receive funding from institutional investors, including pension funds, insurance companies, trusts, corporate investors & individuals with high net worth.

Participation of Banks

Israeli banks cannot own more than twenty percent of shares of any organization. This means that they can’t finance PEFs in Israel.

Tax Incentives

Investing in PEFs with no permanent establishment in Israel isn’t subject to a capital gains tax. PEFs with a permanent establishment in Israel are often exempted from a capital gains tax.

Israel: Entering the IPO Market

All Israeli PEFs can be listed on Israeli stock exchanges. Recent years have seen an innovative product listing system being put in place which allocates an identical amount of securities to all investors & displays shares quoted by funds in their investors’ bank accounts. The system can be used by both Israel-registered investment funds & funds registered abroad.