Erdinast, Ben Nathan, Toledano & Co > Tel Aviv, Israel > Firm Profile

Erdinast, Ben Nathan, Toledano & Co > Firm Profile

Erdinast, Ben Nathan, Toledano & Co.  is a premier full-service law firm and one of Israel’s most prominent and fastest growing law firms with over 160 lawyers across multiple practice areas and disciplines.

Our first-class pedigree, international training and hands on experience regularly earns our firm pivotal roles in some of the most complex, pathfinder and high profile transactions and legal proceedings conducted in Israel.

Our firm is consistently ranked as a top tier firm by Chambers Global, Legal 500, IFLR1000, Mergermarket and the Israeli ranking guides, thus recognized as an Israeli “go to firm” for a client roster across the spectrum of many sectors, ranging from multinational corporations and businesses, private and public companies listed on domestic and international stock exchanges, reputable business individuals, Israel’s leading real estate companies, hi-tech companies of all stages of growth, financial institutions, private equity, venture capital and other investment funds, infrastructure and energy companies, telecom and service providers, TV channels and many more.

Our vast knowledge, professionalism and commitment to providing exceptional service to our clients, is not overlooked and have earned us the title of ‘Israel Banking and Finance Law Firm of the Year’, 2021, awarded by IFLR Europe, as well as ‘Israel Law Firm of the Year’, 2017 and also ‘Israel M&A Legal Adviser of the Year’, 2017, by Mergermarket.

Main areas of practice
Commercial Litigation: The firm has played a central role in legal proceedings in some of the most substantial business disputes in the Israeli economy and has represented prominent local and international parties. The firm’s litigation practice covers a broad range of commercial law fields, including legal disputes relating to corporate control, communications, public tenders, disputes between shareholders, banking, and bankruptcy. The firm has acquired great skill in managing class actions and successfully represents both plaintiffs and defendants.
Heads of department: Adv. Giora Erdinast; Adv. Ran Sprinzak; Adv. Tomer Weissman
Tel: +972 3 777 0100; +972 3 777 0350
Email: erdinast@ebnlaw.co.il; ran@ebnlaw.co.il; tomerw@ebnlaw.co.il

Corporate, Mergers and Acquisitions: Ranked in Tier 1 in Legal 500, the firm is involved in complex and cross-border transactions in the local and international markets, including mergers and acquisitions, investment agreements, financing agreements, and entrepreneurship. The firm has taken part in some of the largest and most prominent merger and acquisitions transactions in Israel in recent years.
Head of department: Adv. Doni Toledano
Tel: +972 3 777 0140
Email: donit@ebnlaw.co.il

Real Estate: Ranked in Tier 1 in Real Estate in Legal 500, we have cemented our national reputation as one of the elite firms in residential, urban renewal and National Outline Plan 38 (TAMA 38), commercial, office towers, hotels, senior housing and other projects that are transforming the Israeli landscape. Our wealth of planning and zoning expertise also obtains the green light for highways, infrastructure and large-scale renewable energy projects. Comprising over 30 lawyers with experience that spans multiple decades, we act for the most active real estate developers and construction companies, associations and purchase groups, landowners and other parties. With an unwavering commitment to excellence, both in advice and service, our seasoned team enjoys a successful track record in complex transactions, purchase/sale contracts and some of the largest projects in Israel. Combining a tailor-made legal strategy for each transaction with our real-world knowledge of real estate law and the Israeli market, we proactively offer our clients an unrivalled and integrated service, advising on construction, senior housing and urban renewal projects, and acting for landowners in combination transactions, co-ownership agreements and the dissolution and management of tenders for the sale of real estate properties.
Head of department: Adv. Dor Shacham
Tel: +972 3 777 0130
Email:dors@ebnlaw.co.il

Planning and Zoning: Ranked in Tier 1 in Planning and Zoning in Legal 500, we have worked hard to earn our national reputation as one of the elite specialist groups in planning and zoning. Clients benefit from our 360-degree understanding of the planning and zoning processes and how the local authorities work, as we also represent a number of local authorities in planning and construction matters, with particular expertise in betterment levies, development fees and other levies.

As such, we win the confidence of some of Israel’s largest companies and developers in relation to their complex construction plans and transactions, guiding them through the promotion of the plan, site-specific plans, master plans in areas such as housing, offices, and infrastructure (desalination plants, railways, gas facilities) and we also handle the zoning and administrative aspects of projects for gas companies, and much more.
Head of department: Adv. Ronen Yardeni
Tel: +972 3 777 0170
Email:roneny@ebnlaw.co.il

Energy and Infrastructure: Ranked in Tier 1 in Energy, we have acquired a reputation as one of Israel’s leading energy and infrastructure firms. The firm represents entrepreneurs and investors in the fields of energy and infrastructure, providing them legal counsel in all aspects of initiating, planning, establishing and operating projects of various sizes, including power stations, water installations, transportation, tenders, licensing and regulations. The firm has an extensive practice of representing energy consumers, and regularly advises industrial plants, income-generating real estate companies, municipal bodies in the process of purchasing electricity at reduced prices, converting and purchasing natural gas, constructing independent power plants and more.
Head of department: Adv. Nadav Olgan
Tels: +972 3 777 0310
Emails: nadav@ebnlaw.co.il

Hi-Tech and Venture Capital: The firm represents private equity funds, corporate funds, investors and start-ups in Israel and abroad, advising them on all relevant matters, including raising capital in Israel and abroad, joint ventures, commercial operations such as licensing, development, production and OEM agreements, as well as exit planning.
Head of department: Adv. Roy Caner
Tel: +972 3 777 0120
Email: roy@ebnlaw.co.il

Media and communications: The firm regularly advises and represents leading Israeli communications companies, including regarding legal proceedings, regulatory matters, and the acquisition of content and licensing. The firm was involved in legal proceedings in which fundamental issues of competition and regulations in the field of media and communications were discussed, and was very successful in these proceedings.
Heads of department: Adv. Hadas Bekel; Adv. Shay Dayan
Tel: +972 3 777 0310; +972 3 777 0360
Email: hadas@ebnlaw.co.il ; shayd@ebnlaw.co.il

Private Clients, Trusts and Estates: Our department supports high-net-worth individuals, families and business owners with crafting their particular wealth management objectives, ensuring succession for future generations. Monitoring current trends and tracking all regulation, we provide sophisticated legal services to Israeli and foreign clients alike in all matters related to the local and overseas management of private and family wealth and assets. Spanning multiple disciplines, we advise on the complementary areas required to effectively manage trusts, including commercial law, real estate law, taxation law, property law, intellectual property law, investments, financing and more.
Head of department: Adv. Shai Pines
Tel: +972 3 777 0150
Email: Shaip@ebnlaw.co.il

Regulations and Administrative Law: The firm has extensive experience in representing senior officers, corporations and financial institutions in their contacts with administrative authorities, government companies and administrative tribunals in all matters relating to tenders, licenses, franchises, administrative enforcement, legislative proceedings, government committees and petitions to administrative courts and the Supreme Court.
Heads of department: Adv. Giora Erdinast; Adv. Ran Sprinzak; Adv. Tomer Weissman
Tel: +972 3 777 0100; +972 3 777 0350
Email: erdinast@ebnlaw.co.il; ran@ebnlaw.co.il; tomerw@ebnlaw.co.il

Labor Law: The firm has the requisite expertise and professional experience in the field of labor law. The firm offers its clients innovative and fresh thinking, based, inter alia, on the ability to analyze broad trends in the field of labor law, and an expansive view of the legal situation and the full range of client interests. The firm provides close and ongoing supervision and consulting to Israeli and international companies, as well as representation in legal proceedings.
Head of department: Adv. Miriam Kleinberger-Attar
Tel: +972 3 777 0120
Email: miriam@ebnlaw.co.il

Insolvency and Debt Arrangements: The firm has vast knowledge and experience in representing creditors of public and other entities in various insolvency proceedings, of considerable magnitude. The department’s staff is highly skilled in working on large and varied transactions to gain control of public and other companies that have encountered difficulties. The firm’s partners are recognized and appointed by the courts as liquidators, receivers and other offices in insolvency proceedings.
Heads of department: Adv. Raanan Kalir; Adv. Alon Binyamini
Tel: +972 3 777 0300
Email: raanank@ebnlaw.co.il ; alonb@ebnlaw.co.il

Capital Markets and Securities: The firm provides legal counsel to a variety of public companies, and regularly handles the submission of prospectuses, requests and reports to the Israel Securities Authority and the Tel Aviv Stock Exchange.
Head of department: Adv. Moty Yamin
Tel: +972 3 777 0150
Email: motyy@ebnlaw.co.il

Banking and Finance: As Israel’s Banking Law Firm of the Year (IFLR Awards), we advise corporations, investors, banks and financial institutions on all aspects of financing transactions in a wide range of sectors and industries. The firm specializes in senior debt loans, consortium arrangements, mezzanine loans, and shareholders’ loans.
Heads of department: Adv. Doni Toledano; Adv. Dan Sella; Adv. Roy Gross
Tel: +972 3 777 0100; +972 3 777 0300; +972 3 777 0350
Email: donit@ebnlaw.co.il ; dans@ebnlaw.co.il; royg@ebnlaw.co.il

East Asia: The firm has extensive experience with Israeli entities operating in China, seeking to expand their business. Within this framework, the firm represents significant world-renowned investors and Chinese companies in locating leading technology and industrial ventures in Israel, also assisting in making acquisitions and Investments in Israeli ventures and businesses.
Head of department: Adv. Lior Oren
Tel: +972 3 777 0320
Email: lioro@ebnlaw.co.il

Privacy and Data Protection, Cyber and IT: The firm further provides advice on aspects of information governance and complex technology applications incorporating data processing, such as SaaS, web and mobile apps, and automation. In addition, the firm maintains significant knowledge of advanced regulatory frameworks such as the GDPR, CCPA and HIPAA and retains unique expertise in the processing of health data.
Head of department: Adv. Lior Etgar
Tel: +972 3 777 0120
Email: liore@ebnlaw.co.il

Lawyer Profiles

Photo	Name	Position	Profile
	Adv Menachem Abramovich	Partner, Litigation Department	View Profile
	Adv Jonathan Achiron	Partner, Corporate and M&A Department	View Profile
	Adv Noa Bar	Partner, Litigation Department	View Profile
	Adv Hadas Bekel	Partner, Litigation Department, Co-Heads the Telecom & Media Department	View Profile
	Adv Adva Benor	Partner, Real Estate Department	View Profile
	Adv Yael Benyayer	Partner, Corporate and M&A Department	View Profile
	Adv Alon Binyamini	Co-Heads the Insolvency, Receivership and Liquidation Department	View Profile
	Adv Arik Brenneisen	Partner, Commercial Litigation Department	View Profile
	Adv Karin Bresler	Partner, Real Estate, Banking & Finance Departments	View Profile
	Adv Roy Caner	Co-Heads the Corporate and M&A Department, Heads the Hi-Tech Group	View Profile
	Adv Itay Chelouche	Partner, Real Estate Department	View Profile
	Adv Efrat Cibulski	Partner, Litigation Department	View Profile
	Adv Yaron Cohen	Partner, Energy and Infrastructure Department	View Profile
	Adv Shay Dayan	Partner, Corporate and M&A Department, Co-Heads the Telecoms and Media Department	View Profile
	Adv Miriam Donin-Shoob	Partner, Real Estate and Planning & Zoning Departments	View Profile
	Adv Naama Ehrlich	Partner, Litigation Department	View Profile
	Adv Liat Elpaz	Partner, Litigation department	View Profile
	Adv Giora Erdinast	Founding partner, Heads the Litigation Department	View Profile
	Adv Hadas Erenberg	Partner, Labor Law Department	View Profile
	Adv Nir Friedman	Partner, Litigation Department	View Profile
	Adv Yifat Fux	Partner, Real Estate, Planning and Zoning, Private Clients, Trusts and Estates Departments	View Profile
	Adv Almog Gil-Or	Partner, Litigation Department	View Profile
	Adv Roy Gross	Partner, Corporate and M&A Department, Co-Heads the Banking and Finance Department	View Profile
	Adv Hagar Guri	Partner, Securities and Capital Markets Department	View Profile
	Adv Raanan Kalir	Partner, Co-Heads the Insolvency, Receivership and Liquidation Department	View Profile
	Adv Irina (Iris) Kushel	Partner, Corporate and M&A Department	View Profile
	Adv Gil Levkovitz	Partner, Litigation Department	View Profile
	Adv Uri Mandel	Partner, Energy & Infrastructure Department, Heads the Project Finance Department	View Profile
	Adv Ohad Michael	Partner, Corporate and M&A, Banking and Finance, Hi-Tech and Technology Departments	View Profile
	Adv Gabi (Gabriel) Moyal-Maor	Partner, Litigation, Arbitration, Mediation and Alternative Dispute Resolution (ADR) Departments	View Profile
	Adv Ram Museri	Partner, Planning and Zoning, Administrative Law Departments	View Profile
	Adv Yuval Naim	Partner, Litigation Department	View Profile
	Adv Nir Nordan	Partner, Litigation Department	View Profile
	Adv Lior Oren	Partner, Corporate and M&A Department, Heads the firm’s East Asia Practice	View Profile
	Adv Shai Pines	Partner, Heads the Private Clients, Trusts and Estates Department	View Profile
	Adv Ori Primo	Partner, Litigation department	View Profile
	Adv Efrat Rozner	Partner, Litigation Department	View Profile
	Adv Gal Rub	Partner, Energy and Infrastructure Department	View Profile
	Adv Dan Sella	Partner, Co-Heads the Banking and Finance Department	View Profile
	Adv Dor Shacham	Partner, Heads the Real Estate Department	View Profile
	Adv Yaron Sobol	Partner, Corporate and M&A, Hi-Tech Departments	View Profile
	Adv Amnon Sorek	Partner, Corporate and M&A Department	View Profile
	Adv Ran Sprinzak	Partner, Co-Heads the Litigation Department	View Profile
	Adv Eleanor Stark	Partner, Litigation Department	View Profile
	Adv Doni Toledano	Managing Partner, Head of the M&A and Banking and Finance Departments	View Profile
	Adv Yael Urieli	Partner, Planning and Zoning, Renewable Energy Departments	View Profile
	Adv Haim Waintrob	Co-Heads the Planning & Zoning Department, Partner in the firm’s Administrative Law…	View Profile
	Adv Tomer Weissman	Partner, Co-Heads the Litigation Department	View Profile
	Adv Eyal Wiesel	Partner, Corporate and M&A Department	View Profile
	Adv Tom Wolfstein	Partner, Real Estate Department	View Profile
	Adv Moty Yamin	Partner, Heads the Capital Markets & Securities Department	View Profile
	Adv Ronen Yardeni	Heads the Planning and Zoning Department, Partner in the firm’s Renewable Energy…	View Profile

Focus On

Asset Purchase Transactions

Israeli M&A Activity – Market Trends Towards 2023

After two prosperous years in the Israeli M&A market, which can be generally categorized as having been a “pro-seller” market, it appears that the tide is changing into a “pro-buyer” market. This shift can be attributed in great part due to global and macro-economic changes, and is, naturally, affecting the terms and conditions and deal structure of the transactions today. We are starting to see fewer (successful) bids, longer negotiation and due diligence periods (including in connection with the company valuations), and a more frequent occurrence of asset-based transactions.

As investment and private equity funds still have significant ‘dry powder’ to invest, and there are many investment opportunities at more modest (and perhaps “realistic”) valuations, we foresee that towards the second half of 2023, investors will get back into the ring just as companies will be in need of financing, with their “Corona era” funds coming to an end. We anticipate that the Israeli M&A market, at least in the short term, will continue being a pro-buyer market, with one of its characteristics being a growing number of asset-purchase deals.

Essential Considerations for Choosing an Asset Purchase Transaction

When buying or selling a business, owners and investors may choose to structure the transaction as a sale and purchase of assets, or a sale and purchase of shares, depending on a variety of considerations and factors. Share purchase deals, by their very nature, result in the transfer of ownership of the entire business entity itself. When an asset transaction is contemplated, several factors come into play, as the sale of specific assets and the assumption of specific liabilities are at the heart of the transaction.

Here is a brief review of various aspects that may affect the decision of the parties to pursue an asset-based transaction or a share-based transaction.

• ‘Cherry-picking’ of Assets and Liabilities. Choosing the assets and the assumed liabilities is probably the most significant advantage of asset purchase transactions over a share purchase deal. This modular transaction allows the buyer to limit the potential liability that it will be exposed to as a result of the transaction, exclude un-necessary assets and liabilities which it is not interested to purchase, and use a ‘cut-off’ date at closing, allowing for a clear date on which the assignment of the assets and liabilities occur. The foregoing is contrary to share purchase transactions, where the buyer acquires a company with all of its liabilities and exposures (however subject to limited indemnification from the seller).
• ‘Double’ tax layer for Sellers. When a company sells its assets, the capital gain from the sale will be added to its revenues for that tax year, and the company will then be charged with corporate tax (currently at the rate of 23%). The remaining amount of gain will be directed to the company’s retained earnings, so if shareholders wish to withdraw the retained earnings attributed to the transaction, they will have to declare the distribution of dividends, which will then be subject to tax dividend (currently at the rate of 25%, or 33% for a controlling shareholder, including 3% suretax). As such, the effective tax rate for shareholders of the company may be higher than that if they had sold their shares.
• Expiration of Permits and Approvals. Specific permits, approvals, tenders, or existing licenses may expire upon transfer of the assets, and buyer would therefore need to re-apply for such permits and approvals in its name. This must be identified and be considered by buyer prior to the transaction as it may be fundamental to the company’s business and operations. Furthermore, the buyer should take into consideration that regulators (both at the governmental and municipal level) may take advantage of this opportunity to enforce or impose new terms and conditions or restrictions.
• Complex Closing. The process of acquiring a company’s assets may be more complicated as a result of the specific treatment required for each acquired asset. Seller may find it difficult to separate the sold activity in order to classify assets, P&Ls, and liabilities, which may require additional preparations on its behalf. On buyer’s side, buyer may come across obstacles in possessing the assets in the purchased activity, such as operational difficulties to move assets and processes from one location to another, transfer of employees and contractors, assignment of contracts with clients or vendors, obtaining permits and licenses, obtaining third party consents from lenders and lessors, and so forth.
• Assignment of Contracts. Absent specific assignment provisions in the contract, generally an assignment of a contract would require the consent of the other party, unless the assignment is of rights, in which case the assignment may be effected upon notice. This requires the buyer to identify the key contracts with suppliers and customers and verify what can be assigned to the buyer at closing. Assignment of key contracts may be a burden on the completion of a transaction, particularly if a third party’s consent is required in order to amend the contract’s terms and conditions, or in cases where the assignment of the contract can trigger the termination of the contract.
• Approval Mechanism. An asset deal would customarily require only the approval of the board of directors of the company, which avoids having to approach the shareholders of the company and untimely dealings with multiple sellers, minority shareholders, and the like.
• Shorter Due Diligence. Asset purchase transactions require a relatively short due diligence process as opposed to a share purchase transaction, since less emphasis is placed on the potential liabilities and exposures of the target company as a whole, and the advisors can rather focus on the acquired activity. This simplified due diligence process reduces transaction expenses for the buyer.

General Structure of Asset Purchase Agreements

The basic structure of an asset purchase agreement will include the following provisions:

Purchased Assets and Excluded Assets. The parties should ideally specify (most conveniently in scheduled lists), which assets are acquired by, and which assets are not being acquired, and therefore remain with the seller. The excluded assets will remain in the sole ownership and responsibility of the selling company.

Assumed Liabilities and Excluded Liabilities. The parties should specify which liabilities are assumed and which liabilities are excluded by the buyer, and therefore remain with the seller. The exclusion of certain liabilities is important for protecting buyer from known and unknown exposures, e.g., obligations of the seller towards its customers; expenses incurred by the seller in the development or procurement of the purchased assets; obligations to employees and service providers for the pre-closing period; accounts payable; liability arising from the seller’s failure to perform agreements; and the like.

Purchase Price Allocation. It is advisable for the parties to agree on the allocation of the purchase price between the various acquired assets and assumed liabilities, so that there is alignment in the reporting to the tax authorities, and the correct calculation of the tax (where value added tax or purchase tax is involved). Accounting considerations should also be considered here (inter alia with respect to depreciation and amortization) and planning the “exit” taxes (in terms of the original purchase price).

Specific Israeli Issues in an Asset-based Transactions:

Transfer of employees

Specific attention should be given to the method of transfer of employees of the company, which can either take the form of ‘fire and (re)hire’ or ‘employee transfer in continuity’. In addition, where an employee union is involved, the transfer may likely involve negotiation and the execution of a new or amended collective bargaining agreement, which should be taken into consideration in connection with costs as well as delays in the transaction time.

The ‘fire and (re)hire’ method is comprised of the employment relationship between the transferred employees and the seller being terminated and pursuant to which the seller (being the employing company) must pay the transferred employees all payments they are entitled to upon such termination, and the transferred employees are thereafter rehired by the buyer. Employee transfer in continuity is essentially where the buyer hires the transferred employees but assumes the continuity of the employment of the transferred employees and all the entitlements, obligations, and exposures in connection with their employment with the seller.

The ‘fire and (re)hire’ method is typically preferred by buyers, as buyers avoid certain exposures with respect to the pre-closing employment period. This does not mean that buyer should be indifferent to the rights of the transferred employees, and it is in its interest to confirm that the hired employees are fully paid by the seller for all their pre-closing entitlements. It is important for the buyer to note however, that even under ‘fire and (re)hire’, Israeli law provides for the continuity of certain of the rights of the re-hired employees with their new employer (the buyer), such as acknowledging the transferred employees’ seniority and service credit, considering their employment period with their former employer.

For example, Section 30)a( of the Wage Protection Law, 5718-1958 provides that a new employer may remain liable for wages, salary and provident fund payments (a liability which could be mitigated under certain circumstances); and Section 18 of the Collective Agreements Law, 5717-1957 provides that the new employer will take on the liability in connection with any obligations under a collective agreement. In addition, there are other laws and regulations which focus on the “workplace” rather than on the identity of the “employer” in order to determine the entitlement to certain rights, such as sick days, entitlement to annual leave, qualification period for pregnancy protection rights, etc.

By choosing the ‘fire and (re)hire’ method, the pension funds (which include all or part of the severance pay as well) are, in general, released to the employee, and the buyer will become the new employer and responsible for the contribution of pension and severance payments starting from the closing date. Also, in ‘fire and (re)hire’, employees are entitled to their severance pay, all or portion of which was accumulated in the pension funds (as described below), redemption of accrued and unused vacation days and accrued convalescence pay.

Lastly, according to Israeli labor laws, an employer cannot transfer its employee to another employer without his or her consent. This means that even in the ‘employee transfer in continuity’ method the employee needs to agree to be employed by the buyer. Also, it should be noted that no funds will be released to the employee, including severance pay, as all the funds will be transferred to the buyer as the new employer. The buyer will be responsible for the pre-closing employment period and therefore it should verify that funds and contributions were properly and timely made by the seller. The transfer of the employees’ pension funds requires specific notice to the tax authorities which should be provided prior to the closing.

Transfer of Knowledge

The transfer of intellectual property rights is generally realized through the asset purchase agreement itself. With the exception of registered intellectual property such as patents and trademarks which are administered by the Israeli Registrar of Patents and the Registrar of Trademarks, all other intellectual property rights, including copyrights, are not required to be registered in Israel.

This means that in terms of the transfer of intellectual property assets in technology-based companies, much more attention should be given in the due diligence phase, to identify the following risks and exposures:

• analyzing all intellectual property provisions relating to strategic alliances, services, manufacturing, supply and distribution, settlements, and intellectual property licensing;
• review and analysis of the target company’s agreements with employees and consultants involved in the R&D and the undertakings thereunder regarding the assignment of intellectual property rights to the company;
• reviewing the company’s use and application of open-source codes and compliance with their license terms; and
• confirming whether there was any governmental funding provided to the target company relating to funding of R&D activities, and specifically funding from the IIA – Israel Innovation Authority.

With respect to the last point, in many transactions involving technology companies, one may encounter the IIA (or in its former name, Office of the Chief Scientist), which provides funding to technology companies through various R&D grant programs, which grants are generally repaid from revenues from sales of products. Many Israeli early-stage Hi-Tech companies obtain these grants, which have attractive terms, and as such, become subject to the rules and regulations of the IIA. These rules and regulations include several obligations, processes, obtainment of approvals, or sometimes even fees, when the funded intellectual property is to be transferred.

Israeli Tax issues

A non-Israeli tax resident who sells shares in an Israeli company may be exempt from capital gains tax if several conditions are met. This exemption, however, does not apply to the sale of assets, so in most cases where non-Israeli shareholders are involved, the sale of shares is preferred by the sell-side.

In general, selling assets by an Israeli company is a transaction which is subject to value added tax in Israel (currently at the rate of 17%) on certain types of assets. If the buyer is not an Israeli company or a non-Israeli company registered for VAT purposes in Israel, one of the parties to the transaction will have to bear the value added tax without the possibility of offsetting the tax. Selling shares of Israeli companies, however, is generally not subject to VAT.

In Israel there are very broad withholding obligations. Accordingly, it is market standard for a buyer of assets or shares to require seller to present a certificate issued by the Israel Tax Authority that seller is exempt from Israeli withholding. Without such a certificate the buyer will have to withhold Israeli tax at the applicable tax rate.

Transfer of real estate

When one of the acquired assets is real estate, the buyer should examine the specific risks and associated real estate taxes (including purchase tax), and consider the resulting mechanics, such as the use of escrow, the release of (and registration of new) mortgages, payment of municipal taxes and the receipt of the necessary approvals for the transfer of the real estate with the Registrar of Real Estate. Where the real estate is owned by the State of Israel (which is the case in most transactions) its consent is required (mostly, but not all, through the Israel Land Authority).

Transfer of Personal Information and Databases

The Israeli Privacy Protection Law, 5741-1981 and the regulations promulgated thereunder regulates the collection and use of personal data, pursuant to which a collection of personal data processed by an entity should be administered as a “database” which may be subject to a registration requirement with the Registrar of Databases at the Israeli Privacy Protection Authority. This Authority oversees compliance with the privacy laws in Israel any transfer of a registered database should be pursuant to guidance issued in this regard and maintaining the data subject rights.

The main risk at hand here is the sharing of personal data collected by the seller for certain purposes with buyer, which may give rise to the need in providing disclosure to the data subjects, and in some cases, even obtaining their consent, whether opt-out or on an opt-in basis.

In some asset-purchase deals, the purchased assets do not contain an entire database but rather only certain parts of it, and this requires special attention to data mapping, listing the information systems, and analyzing the privacy risks involved therewith. In other deals, the buyer may need the seller to keep processing the purchased information for a designated period following closing, due to operational or regulatory need.

In all of the foregoing scenarios, the parties will need to identify the databases and categories of personal data involved, to define the lawful basis for sharing the data, and to determine the relations of the parties until closing or thereafter in terms of controller-processor relations (or in Israel, a database manager – holder relations).

Public Registrars

When purchasing assets that are registered in a public registry, it is important to complete the process by updating the applicable registry. It should be noted that in some cases the registry is constitutive as to the rights of the registered owner. Common registries include the Registrar of Real Estate, the Licensing Registry of the Ministry of Transport and Road Safety, the Patent Registrar, the Trademarks Registrar and the Registrar of Databases. Buyer should also check with the public registers administering pledges and charges which may be imposed on the purchased assets.

Summary

Asset purchase transactions are generally more complex for both the sell-side and buy-side, but have their advantages, mainly for the buy-side, and so they are likely to be more popular in a “pro-buyer” market, as currently seen in the Israeli M&A market. In light of the complexity and special characteristic of asset-based transactions, it is recommended to involve local counsel from the early stage of the transaction structuring, in order to make the process as efficient and short as possible, as well as to address the various factors set out above, which are for the most part, Israel specific.

Authors

Lior Etgar, Partner, leads the Data Protection and Privacy Practice

Shay Dayan, Partner, Corporate and M&A Department