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Corporate Law

Can an Israeli private company have more than 50 shareholders?

No, not while remaining private. The Companies Law 5759-1999 defines a private company (chevra pratit) as one whose number of shareholders does not exceed 50, not counting present or past employees who became shareholders during their employment. A company that needs more than 50 shareholders must register as a public company (chevra tziburit), which brings prospectus, reporting, and governance obligations. Many foreign founders never reach this ceiling, but it becomes relevant for widely held ventures, crowdfunding style rounds, or broad employee share ownership. Structuring, such as holding shares through a trustee, is the usual way to stay within the limit.

The Companies Law 5759-1999 draws a clear line between private and public companies, and the shareholder count is central to it. A private company is limited to 50 shareholders, with a specific carve out for people who hold shares by virtue of being current or former employees. Joint holders of a single share are counted as one shareholder for this purpose. Once a company genuinely needs to distribute shares to more than 50 holders, it falls outside the private company definition and must comply with the public company regime, including the rules enforced by the Israel Securities Authority if it offers shares to the public. The Companies Registrar (Rasham HaChavarot) maintains the company's registered particulars. See our guide to company formation in Israel for how the entity types compare.

For foreign investors and startups, the 50 shareholder cap is mostly a planning issue that surfaces during fundraising or when designing an employee equity pool. A common solution is to pool small investors or option holders under a trustee or a single holding vehicle, so that many economic participants are represented by one registered shareholder. This keeps the company private while still spreading economic ownership. Employee option holders benefit from the statutory carve out, which is why broad option programs rarely breach the limit on their own. If a financing round would push the register past 50 genuine holders, the company should take Israeli corporate advice before closing, because converting to a public company is a substantial step with ongoing disclosure duties.

⚖ In Practice
  • Governing law: Companies Law 5759-1999 (definition of a private company)
  • Shareholder cap: 50 for a private company; employees and former employees holding shares are excluded from the count
  • Competent authority: Companies Registrar (Rasham HaChavarot); Israel Securities Authority for public offerings
  • If exceeded: the company must register and operate as a public company (chevra tziburit)
  • Common workaround: holding shares through a trustee or holding company
  • Counting rule: joint holders of one share count as a single shareholder

From the full guide: Company Formation in Israel

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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