Nominee Shareholders and Directors in Israel: Limited Confidentiality

Under Israeli law there is a statutory requirement for a minimum of one shareholder and director.

While in some jurisdictions the details of the shareholders and directors are confidential, in Israel there is a statutory requirement for the details of shareholders and directors to be put on public record. This public record can be easily viewed via the internet from any place in the word for a very modest fee.

Due to the above statutory requirement, the option to remain out the public eye is to nominate a "nominee shareholder" and a "nominee director" that will be registered on your behalf in the public records.

While using a nominee shareholder and director can provide some confidentiality, it is important to understand that this confidentiality is limited.

One important limitation of confidentiality is section 131 of the Israeli Companies Ordinance, 1999, according to which: "A shareholder who is a trustee shall be registered on the register of shareholders, with a reference to the trusteeship, and such person shall be considered a shareholder for the purposes of this Law". Since the registry is public, the reference to the nominee shareholder as such reveals its function.

Another important limitation is the Israeli courts' relation to the confidentiality of the beneficiary's identity, as in the judgment of the Tel Aviv - Jaffa District Court of July 6, 1997 in case 2163/96. In this case the district court was requested to order an Israeli attorney who was registered as the nominee shareholder of the Israeli IKEA franchiser to reveal the identity of the beneficiary shareholder. The court ruled that the beneficiary's identity was notconfidential under Israeli laws.

Additional important limitations are the statutory requirements to reveal the identity of the beneficiary shareholder to the company's bank (due to the Prohibition on Money Laundering Law, 2000) and to the tax authorities.

To conclude, a nominee shareholder and director can offer some confidentiality to the true owner of an Israeli company. The main (if not the only) benefit of the use of nominee is preventing a direct reference to the true shareholder in the public record. As shortly described above, this confidentiality is far from being "bullet proofed" and has significant limitations.

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