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What is the difference between a pledge and a floating charge on Israeli company assets?

An Israeli pledge (*mashkon*) under the Pledge Law 5727-1967 is a fixed security interest that attaches to specifically identified assets. A floating charge (*shiabud tzaf*) under the Companies Law 5759-1999 is a security that hovers over a shifting pool of assets — all inventory, all receivables — and crystallizes into a fixed charge only on default or insolvency. Pledges are registered with the Pledge Registrar; floating charges are registered at the Companies Registrar. Both rank ahead of unsecured creditors in insolvency, but fixed security generally takes priority over floating charges when assets are realized.

The Pledge Law 5727-1967 governs consensual security over movable assets in Israel. A pledge must identify the charged asset with sufficient specificity and must be registered in the Israeli Pledge Registrar (*Rasham HaMashkonoth*) within 21 days of execution to be effective against third parties; an unregistered pledge loses priority to a later-registered interest. Once registered, a pledge gives the creditor a proprietary right to the specific asset: the debtor may not sell or encumber it without the creditor's consent. Pledges are commonly taken over bank accounts, receivables, equipment, intellectual property, and securities. A mortgage (*mashkanta*) over Israeli real estate is a specialized form of fixed security governed by the Land Law 5729-1969 and registered at the Land Registry rather than the Pledge Registrar.

A floating charge, by contrast, allows the company to deal freely with the charged assets during normal business — selling inventory, collecting receivables, replacing equipment — without the creditor's consent. The charge only becomes fixed when a crystallization event occurs, typically a payment default, the appointment of a receiver, or the commencement of insolvency proceedings. Floating charges over Israeli companies must be registered with the Companies Registrar within 21 days of creation. Under the Insolvency and Economic Rehabilitation Law 5778-2018, floating charge holders rank after certain priority creditors — including employees' wage claims for up to 12 months and the National Insurance Institute — even though they rank ahead of unsecured trade creditors. Foreign lenders and investors taking Israeli company security should register both types promptly and verify registrations through the public registries before finalizing credit arrangements.

⚖ In Practice
  • Governing law: Pledge Law 5727-1967 (fixed pledges); Companies Law 5759-1999, Sections 169–184 (floating charges); Insolvency Law 5778-2018 (priority in insolvency)
  • Registration — pledges: Pledge Registrar (Rasham HaMashkonoth) within 21 days; registration fee approximately NIS 180 (2026)
  • Registration — floating charges: Companies Registrar (Rasham HaChevrot) within 21 days; failure to register voids priority against third parties
  • Crystallization events: floating charge becomes fixed on default, court order, receiver appointment, or commencement of insolvency
  • Priority in insolvency: fixed security holders rank first; floating charge holders rank after employees (up to 12 months wages) and National Insurance claims

From the full guide: Collecting from Israeli Companies: A Guide for Foreign Creditors

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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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