Does an Israeli company need an internal compliance and enforcement program?

Israeli corporate criminal liability attaches to a company through the acts of the individuals who direct it, so the state can prosecute the company itself for conduct by senior employees. The regulators built the internal enforcement concept on that foundation: a program that is documented, funded, led by a named officer, and actually applied can reduce or avoid an administrative penalty, while a policy that sits unread does not. The Competition Authority looks for risk mapping, training, reporting channels, and periodic audit, and the Securities Authority applies comparable criteria to reporting companies. The Companies Law never names compliance programs, but the duty of care in Section 252 is measured against what a reasonable director in the same position would have done.

For a foreign group with an Israeli subsidiary, the common mistake is assuming the parent’s global program already covers it. It rarely does without adaptation, because Israeli competition, privacy, and employment rules diverge from their US and EU equivalents and because regulators expect Hebrew-language materials and a locally reachable officer. Budget for a risk assessment, a written policy approved by the Israeli board, annual training, and a reporting channel that works with the Protection of Employees (Disclosure of Offences) Law 5757-1997. Minute the board approval, because that record is what evidences the directors’ diligence if a regulator asks years later. Our guide to directors’ duties and corporate governance in Israel sets out the wider board obligations.

From the full guide: Corporate Governance in Israel: Directors' Duties

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