ISRAEL Law and Practice Contributed by: Shiri Shaham, Yuval Shalheveth, Aviad Lachmanovitch and Asher Bichoonski, Arnon, Tadmor-Levy
3. Structuring and Documentation 3.1 Restrictions on Foreign Lenders Providing Loans Foreign lenders are not restricted from providing loans in Israel, but they must do so under one of the exemp- tions from the licensing requirements. Refer to section 2.1 Providing Financing to a Company for the main exemptions. In a nutshell, licensed banks and insur- ance companies incorporated and regulated in OECD countries, including with respect to AML duties, are exempt from such licence requirements. In addition, foreign lenders may rely on the position paper published by the Capital Markets Authority which provides criteria regarding the territorial appli- cability of the Israeli licensing requirement and for lending not subject to Israeli regulations: • the loan documents are not in Hebrew, are signed outside of Israel and are subject to foreign law; • the lender extends the loan by depositing the loan amount in a bank account outside of Israel; • the lender does not conduct any marketing activi- ties in Israel; and • the lender does not hold meetings in Israel. These conditions are cumulative. Foreign lenders can also apply for a credit licence in Israel. Currently, a credit licence requires that the licence provider will be incorporated in Israel, and this will require such foreign lenders to establish a subsidi- ary for such activity. Registration of a branch does not qualify. 3.2 Restrictions on Foreign Lenders Receiving Security Generally, there are no significant restrictions on pro- viding security or guarantees to foreign lenders direct- ly, or security agents (local or foreign) on their behalf. However, obtaining a security interest (by both local and foreign lenders) over shares in certain regulated companies (eg, banks, insurance companies, telecom- munications or natural gas companies) may require a permit depending on statutory or licence conditions. Loans secured by intellectual property developed
operator does not lend its own funds but rather enables lending and borrowing among the users of the platform, are subject to licensing requirements which are less stringent than those applicable to banks and institutional investors, but are somewhat more stringent than those applicable to “ordinary” private lenders. Currently, only seven entities obtained licences of this type and their market share is relatively small. • Exemptions – certain exemptions apply to private lenders, which are also applied to foreign banks lending into Israel. The most applicable exemptions include: (a) banks incorporated and licensed in OECD countries, provided that such banks are super- vised for AML purposes in such OECD coun- tries and do not engage in activities that trigger a banking licence requirement in Israel (namely: acceptance of deposits and (i) extension of credit, or (ii) management of current accounts with cheques); (b) lenders controlled by such OECD banks, which comply with the said criteria and do not extend retail credit; (c) insurance companies incorporated and li- censed in OECD countries, provided that such insurance companies are supervised for AML purposes in such OECD countries and do not engage in lending to retail clients; (d) dealers in derivatives/repo/securities transac- tions, with respect to credit extended in con- nection with such transactions, and subject to additional conditions; (e) certain types of venture lending – credit des- ignated to corporate borrowers whose main activity is R&D or development and manufac- ture of innovative or know-how-based products or services, and where the risk of investing in such borrowers is higher than typical invest- ments; and (f) lenders that solely provide large business loans to corporations (non-retail) – there is a thresh- old for the minimum value of such loans. The regulatory framework applicable to all licensed credit providers includes comprehensive AML/CFT requirements.
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