Quick Answer: Shares in an Israeli company pass to the heirs the moment the shareholder dies, but you cannot do anything with them until you hold a succession order (no will) or a probate order (with a will) from the Registrar of Inheritance Matters. With that order, the company records you in its register of shareholders through a process called transmission, and the change surfaces in the company's next annual report to the Registrar of Companies. There is no inheritance tax in Israel, but capital gains tax applies when you eventually sell.

A parent or relative dies in Israel, and somewhere in the estate sits a private company. Maybe it is the family business. Maybe it is a holding company that owns a single Tel Aviv apartment. Maybe it is dormant shares nobody thought about until the accountant mentioned them. For an heir living in New York, London, or Sydney, this is one of the more confusing corners of an Israeli estate, because two legal systems meet here: inheritance law decides who gets the shares, and company law decides how the shares actually move and what you can do with them once they are yours.

This guide walks through both halves. It covers the order you need before anyone will talk to you, how shares pass to heirs by transmission, how the company's own rulebook can limit what you inherit, and what tax to expect. The focus is on private limited companies, where most family shareholdings sit. Publicly traded shares held in a brokerage account follow a simpler, bank-driven route that looks more like inheriting a securities account.

1. What you actually inherit

When you inherit shares, you do not inherit the company's assets directly. You inherit a bundle of rights against the company: a slice of its profits if dividends are declared, a vote at the general meeting in proportion to your holding, a share of whatever is left if the company is wound up, and the right to inspect certain corporate records. If the late shareholder owned 100% of a company that owns an apartment in Tel Aviv, you do not become the owner of the apartment. You become the owner of the company that owns it, which is a different thing with its own tax and reporting consequences.

The share also carries whatever is attached to it. If the deceased signed a personal guarantee for the company's bank loan, that guarantee is a debt of the estate, and it does not vanish because the guarantor died. If the shares were pledged to a bank or a creditor, you inherit them subject to that pledge.

Under section 1 of the Inheritance Law, 5725-1965, the estate passes to the heirs at the moment of death. So in a strict legal sense you already own the shares from day one. The difficulty is practical: until you can prove it with an official order, the company's directors, its bank, and the Registrar will not recognise you as the holder.

In practice: The most useful thing you can do early, before spending money on the inheritance order, is pull the company's public file. Anyone can order a company extract (nesach chevra) and the articles of association from the Israeli Corporations Authority (Rashut HaTagidim) online for a nominal fee of around NIS 10 per document. Those records tell you how many shares exist, who the other shareholders are, whether the company is up to date on its annual fee, and which restrictions apply. It is the cheapest hour of due diligence you will spend on the whole matter.

2. The order you need first

Nothing happens with the shares until you hold the right court order, and which one you need depends on whether the deceased left a valid will.

  • If there is no will, you apply for a succession order (tzav yerusha), which lists the legal heirs and each one's fractional share under the intestacy rules. Under sections 10 and 11 of the Inheritance Law, the surviving spouse and the children normally share the estate between them.
  • If there is a will, you apply for a probate order (tzav kiyum tzava'a), which confirms the will is valid and gives it legal force.

Both applications go to the Registrar of Inheritance Matters (HaRasham LeInyanei Yerusha), a body inside the Ministry of Justice with five regional offices: Jerusalem, Tel Aviv, Haifa, Be'er Sheva, and the Central District in Lod. The application is published so that creditors and potential objectors get notice. If nobody objects within the statutory window, the Registrar issues the order. If someone does object, or the estate involves a charity, a minor, or missing heirs, the file moves to the Family Court.

In practice: Government fees here are low and fixed by regulation. Budget roughly NIS 500 to NIS 750 for the application plus about NIS 130 for the mandatory publication, and note that the Registrar updates these figures each January. Objections must be filed within two weeks of publication. An uncontested order usually issues within a few weeks to a couple of months; a contested one can sit in the Family Court for a year or more. If you are abroad, you can sign the application before an Israeli consul, or have your signature notarised and apostilled under the 1961 Hague Apostille Convention, and an Israeli lawyer holding your power of attorney can then file and chase it without you flying in.

3. Transmission is not a transfer

Here is the distinction that trips people up. A transfer of shares is voluntary: a living shareholder sells or gifts shares, and both sides sign a share transfer deed. Transmission is different. It happens automatically by operation of law when a shareholder dies, and there is no seller left to sign anything. The heir steps into the shares because the law put them there.

What that means in practice is that the company cannot refuse the inheritance itself. The directors cannot say "we don't want you as a shareholder" and keep the shares for the others. What they can do is insist you produce the succession or probate order before they record you, and they can apply any conditions written into the articles of association. Once you present the order, the directors pass a resolution recognising the transmission and enter your name in the register of shareholders.

Where there are several heirs, the shares are usually held jointly by the estate until the estate is divided. Many families appoint an estate administrator (menahel izavon) to hold and vote the shares in the meantime, especially where the company is an operating business that cannot sit frozen while the heirs sort themselves out.

In practice: The binding record of who owns shares in an Israeli private company is the company's own register of shareholders, kept under the Companies Law, 5759-1999, not a file at any government office. So the documents you actually need from the directors are the board resolution recording the transmission and an updated register entry in your name. Ask for copies of both in writing. The Companies Law gives a shareholder the right to inspect the register, and if your name is wrongly left off, you can apply to the court to order the register rectified.
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4. Updating the registers

Two registers matter, and people confuse them. The first is internal: the company's own register of shareholders, which the directors update when they record your transmission. That internal register is what legally determines ownership. The second is the public file at the Registrar of Companies (Rasham HaChavarot), part of the Israeli Corporations Authority. For a private company, the share ownership shown publicly is refreshed mainly through the annual report (doch shnati) that every company must file, not through a real-time filing each time a share changes hands.

So the practical sequence is straightforward. Get the order, give it to the directors, get recorded in the internal register, and the change then appears in the company's next annual report. If you also become a director (for example, you inherit a controlling stake and the other shareholders appoint you to the board), a separate filing to register the new director applies.

In practice: Watch the annual company fee. Every Israeli company owes the Registrar of Companies an annual fee (agra shnatit) of roughly NIS 1,040 if paid by 31 March, rising to about NIS 1,390 later in the year. A company that stops paying is flagged as a "violating company" (chevra mefera hok), which blocks routine filings and can expose its directors to penalties. If you inherit control of a company that has fallen behind, clearing the arrears at the Corporations Authority is usually the first piece of housekeeping before you can do anything else with it.

5. What the articles can do

The company's articles of association (takanon) are its private rulebook, and they can shape what you inherit in ways that surprise foreign heirs. The provisions to look for include:

  • Pre-emption rights. Before shares can be registered to an heir or sold on, the other shareholders may have a first right to buy them at a set price or a valuation formula.
  • Approval of transmission. The articles may require board or shareholder approval before an heir is entered in the register. This cannot defeat the inheritance, only channel it.
  • Buy-sell clauses. In companies with a shareholders' agreement, the death of a shareholder can trigger a mandatory buyout of the inherited shares, sometimes funded by a life insurance policy the company took out for exactly this event.
  • Limits on who may hold shares. A professional company, for instance, may bar non-professionals from holding voting shares.

None of this is improper. It exists to stop a tightly held business from suddenly acquiring an outside co-owner the surviving partners never chose. But it means the value of what you inherit can hinge on a document the deceased signed years ago.

In practice: Read the articles and any shareholders' agreement before you assume you will keep the shares. If there is a buy-sell clause, you may end up with cash instead of equity, and the price may follow a formula that is years out of date. Where the formula clearly undervalues the business, heirs can push back, and the Israeli courts will look at whether the valuation mechanism is being applied honestly under the general duty of good faith in section 39 of the Contracts (General Part) Law, 5733-1973. Get an independent valuation of the company before you sign anything.

6. Your rights as a shareholder

Once your name is in the register of shareholders, you have the standard rights of any shareholder in an Israeli company. You can attend and vote at the general meeting in proportion to your holding. You receive dividends when the board declares them, though no shareholder can force a profitable company to distribute its profits. You can inspect core company documents. And as a minority shareholder you are protected against oppression by those who control the company.

That last point matters most for inherited minority stakes. Israeli company law treats a shareholder as owing a duty to act in good faith and to deal fairly with the other shareholders, and it gives the court power to step in when a shareholder is being squeezed out. If the people running the company freeze you out, pay themselves inflated salaries to avoid declaring dividends, or try to dilute your holding, you have remedies, including a claim for discriminatory conduct and, in serious cases, a court-ordered buyout.

In practice: Inherited minority shares in a family company are hard to turn into cash. There is no open market for 15% of a private Israeli company, and the people who would have to buy you out are usually the same people running it. If the dividends dry up the year after you inherit, treat that as a possible freeze-out rather than just a bad year. The remedy for oppression of a shareholder sits in section 191, and the duty of shareholders to act in good faith in section 192, of the Companies Law, 5759-1999. These claims are slow and costly and go to the Economic Division of the relevant district court, so a negotiated exit almost always beats litigation.

7. Tax on inherited shares

Israel has no estate tax and no inheritance tax. It was abolished in 1981. Inheriting Israeli shares is not a taxable event, whether you live in Israel or abroad, and you file nothing with the Israel Tax Authority (Rashut HaMisim) simply for receiving the shares.

The tax shows up later, when you sell or when the company hands out profits.

  • Capital gains on sale. When you sell the inherited shares, you pay capital gains tax. Israeli law gives you no step-up in basis. You inherit the deceased's original purchase price and purchase date, so the taxable gain runs from what the deceased paid, not from the value at the date of death. The standard rate is 25%, rising to 30% if you are a "material shareholder" holding 10% or more.
  • Dividends. Distributions are taxed at 25%, or 30% for a material shareholder, and a high earner may owe an additional surtax on top.
  • Non-residents. If you live abroad, a double taxation treaty between Israel and your country may cut the Israeli rate or give your home country the first claim to tax. The treaty controls, so check it before you sell.
In practice: The no-step-up rule is the real trap. Suppose your father bought his shares in 1990 for the equivalent of NIS 50,000 and the company is now worth NIS 5 million. When you sell, the gain is measured from that 1990 cost, so the bill can be large even though you only just inherited. Before selling, get the original acquisition records from the company's accountant. Without proof of the historic cost, the Israel Tax Authority can treat the cost as zero and tax the entire proceeds. Non-residents should apply for treaty relief in advance rather than trying to claw back over-withheld tax afterwards.

8. Pitfalls for heirs abroad

A handful of mistakes come up again and again with overseas heirs:

  • Assuming a foreign probate is enough. A grant from a court in London or New York does not, on its own, move Israeli shares. You still need an Israeli order, either a fresh application or recognition of the foreign grant.
  • Letting the company drift. An operating company with nobody at the wheel after the founder dies can lose customers, breach its bank covenants, or fall behind on the annual fee. Appointing an estate administrator early keeps it running.
  • Ignoring the shareholders' agreement. A buy-sell clause can convert your shares into a fixed cash sum whether you want that or not.
  • Forgetting the bank guarantee. If the deceased personally guaranteed company debt, that liability is part of the estate and can eat into everything else you inherit.
  • Signing a quick buyout under pressure. Surviving partners sometimes push grieving heirs to sell fast and cheap. Have the company valued first.
In practice: If the company is actively trading, speed matters more than it would for a passive estate. You can ask the Registrar of Inheritance Matters, or the Family Court, to appoint a temporary estate administrator (menahel izavon zmani) to hold and vote the shares while the succession order is pending, so the business keeps functioning. That request can be made together with the inheritance application, and the administrator's powers are then defined by the court under the Inheritance Law, 5725-1965.

None of this needs to be done from a plane seat. Most overseas heirs handle the entire process through an Israeli lawyer holding a power of attorney, signing what they need to before a consul or a local notary. What does need attention is the order of operations: secure the order, get onto the register, read the rulebook, and only then decide whether to keep the shares, run the business, or sell.