Israeli Private Equity Funds Overview

As in many other countries, private equity funds in Israel are set up in the form of limited partnerships.

A limited liability partnership in Israel is a separate legal entity where limited partners do not participate in management. But the general partner manages and bears unlimited liability for obligations. As a rule, private equity funds are not subject to government regulation.

Private Equity Fund Explained

Direct investments are always long-term investments for a period of 5 years or more. Investors need the ability to directly influence the development of the investment object in order to increase the market value of their share and reduce the risks of non-return of invested funds.

Since direct investments are associated with particularly large amounts of capital, they are realized through Private Equity Funds. Such funds are a form of collective investment because in exchange for their shares they attract and invest money from private (rarely) and, most often, institutional investors (for example, insurance companies).

Thus, members of a private equity fund gain access to participation in private business, which is closed to a wide range of investors in the organized stock market.

The process of forming a private equity fund in Israel

The first step in the process of forming an Israeli LLC is to determine which organization will act as its general partner.

There are three options for the development of events:

1. If the general partner is an Israeli company, the formation process will be easy with relatively simple constituent documents and will take less than one month in time.
2. If it is decided to register a new company in Israel, then the formation period may be delayed for a longer period.
3. If the general partner is an Israeli partnership, the application for the general partner as an Israeli LLC must be submitted to the national Companies and Partnership Registrar. Consideration of an application is a rather lengthy process.

Further, an application for setting up a fund in Israel must be immediately submitted to the Register of Companies. Please note that the partnership will most likely not be registered if you don’t have an Israeli address.

Good news for foreign partners: in an Israeli private equity fund, they are tax-exempt on certain types of income.

IPO on the Israel Stock Exchange

All Israeli LLCs can be listed on the Israel Stock Exchange.

The Tel Aviv Stock Exchange recently announced an innovative system for listing alternative investment products. The system assigns a single number of securities to all investors in the product, displays the shares quoted by the funds on the bank accounts of their investors.

The system is intended for use by investment funds both in Israel and registered abroad.

For your info: The Tel Aviv Stock Exchange was established in 1953 on the basis of a securities trading bureau. It is a private company with 27 Israeli banks and brokerage companies among its shareholders.