ISRAEL Law and Practice Contributed by: Shiri Shaham, Yuval Shalheveth, Aviad Lachmanovitch and Asher Bichoonski, Arnon, Tadmor-Levy
A right of set-off complying with the conditions set forth in the law practically allows priority to the credi- tor. • The expenses of the insolvency proceedings – although not typically classified as “creditors’ prior- ity” – are repaid prior to the payment of the debts. • Statutory preferred creditors: (a) employees, with respect to their wages, up to a certain amount specified by law; and (b) certain tax authorities, with respect to certain taxes initiated prior to the insolvency proceed- ings. • Holders of a floating charge (for 75% of the pro- ceeds from realisation of the charge, the remainder is considered unsecured debt). • Unsecured creditors – among themselves pro-rata to the amount of their respective debts. • Subordinate creditors – creditors who specifically agreed to be subordinate to other creditors, and, under certain circumstances, shareholders of the insolvent company with respect to loans they made to the company. 7.3 Length of Insolvency Process and Recoveries The duration of insolvency proceedings varies widely, from a few months to several years, depending on the complexity of the case, the number of objections and petitions, the type of proceedings involved and the types and scope of assets being realised in such proceedings. These factors also influence the rate of recovery. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Temporary measures, such as postponement of pro- ceedings, were introduced during the COVID-19 pan- demic to facilitate rehabilitation without appointing an insolvency official. Court-approved debt arrange- ments are also available, allowing companies to reor- ganise their debts with creditors outside of the insol- vency regime. 7.5 Risk Areas for Lenders The main risks for lenders are the potential delays in the enforcement of contractual rights and security interests once insolvency proceedings commence.
The insolvency process is overseen by a court- appointed trustee and stays of proceedings or limita- tions on enforcement may be imposed. Another risk is potential claims, that may be raised in the framework of insolvency proceedings, claiming that the security interest was not properly perfected (eg, failure to register the security interest on time). Security interests created during the three-month period preceding the issuance of an order for the commencement of insolvency proceedings may be unified, unless the creditor can convince the court that the debtor was solvent at the time of the transaction, that the debtor received adequate consideration in the transaction, or that the transaction was in the ordinary course of business of the debtor. Project finance activity in Israel has been most prom- inent in the transportation sector (light rail and toll roads) and the energy sector (especially renewables and storage). There are also desalination and military infrastructure projects. 8.2 Public-Private Partnership Transactions PPP structures in Israel are similar to those in other jurisdictions, with risk allocation generally favouring the government/public sector. There is no general PPP law; instead, sector-specific legislation applies, such as specific legislation for toll roads. Most PPP projects are governed by concession agreements issued through mandatory public tenders, subject to the Mandatory Tenders Law 1992. In electricity tenders, the winner may be required to obtain a licence depending on the size and characteristics of the project. 8.3 Governing Law Concession agreements and most project documents are typically governed by Israeli law, with disputes usually resolved in Israeli courts or by Israeli arbitra- tion. Tender documents often require that the EPC agreement between the concessionaire and the main construction contractor is also governed by Israeli law and subject to jurisdiction in Israel. Agreements with 8. Project Finance 8.1 Recent Project Finance Activity
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