Can a shareholder pledge shares in an Israeli private company as security for a loan?

A pledge is created by a written agreement between the shareholder and the lender, and it takes effect between them on signature. Registration is what gives it priority against a liquidator, a trustee in insolvency, and later creditors, and priority runs from the date of registration rather than the date of the agreement. A charge created by a company must be registered within 21 days of its creation or it is void against a liquidator and other creditors. Separately, Section 127 of the Companies Law 5759-1999 requires the company to keep a shareholder register, and a prudent lender insists that the pledge be noted there and acknowledged in writing by the company.

A foreign lender should treat a private company share pledge as a slow security interest rather than a liquid one. Start by pulling a Companies Registrar extract to see what charges already exist and read the articles for transfer restrictions, rights of first refusal and drag-along provisions, all of which survive enforcement and shape what a buyer can actually acquire. Take an undated share transfer deed and a board acknowledgment into escrow alongside the pledge. Realization runs through the Execution Office or a court-appointed receiver, and the practical value depends heavily on the shareholders agreement. The mechanics of moving shares are set out in the guide to share transfers in an Israeli private company.

From the full guide: Share Transfer in an Israeli Private Company: A Guide for Foreign Investors

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