When a business runs into trouble, the owner’s biggest fear is personal exposure. Here is how Israeli insolvency treats the self-employed and company directors.
The self-employed (osek)
A self-employed person is personally liable for business debts, so business and personal debt are intertwined. Insolvency can address them together, protect essential work tools needed to keep earning, and aim at a discharge so the person can rebuild — and even start a new business later.
Company directors and shareholders
A limited company is a separate legal person, so owners are generally not personally liable for its debts. The main exceptions are personal guarantees (which many owners sign for bank loans or leases), certain tax and withholding debts, and rare cases of “lifting the corporate veil” where the company was misused.
When personal insolvency is the answer
If personal guarantees or other exposure leave an owner with debts they cannot pay, personal insolvency provides a route to discharge those debts and start over. Handling the company’s fate and the owner’s personal exposure are two separate tracks that must each be managed correctly.
Frequently asked questions
My company failed — am I personally liable?
Usually not, because a company is a separate legal person. The main exceptions are personal guarantees you signed, certain tax/withholding debts, and rare “veil-lifting” cases.
Can I start a new business after a discharge?
Yes. A discharge is designed to allow a fresh start, including returning to business in the future.
Official sources
- Commissioner of Insolvency and Economic Rehabilitation — official site (Ministry of Justice)
- “Mamo-Net” — online applications to the Commissioner (Ministry of Justice)
- Kol-Zchut — Insolvency and Economic Rehabilitation (Bankruptcy)
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