Articles of association in Israel – the Law’s defaults versus tailored articles

Corporate · October 19, 2026 · 9 min read

The short answer

The articles are the only document that binds the company itself towards its shareholders: “the articles are as a contract between the company and its shareholders and among the shareholders themselves” (section 17(a) of the Companies Law). The Law requires four items in them – name, objects, registered capital and limitation of liability (section 18) – and contains no “model articles”; everything not written is governed by the Law’s defaults, which were written for the average company and not for two founders who split a company down the middle. By default the articles are amended by simple majority, the board allots shares without a pre-emption right, shares are freely transferable and a director is removed by simple majority. Tailored articles change that with the tools the Law itself provides: an entrenched special majority (section 20(b)), a limit on the company’s power to amend (section 22), transfer restrictions (section 294), share classes and appointment rights. And a founders’ agreement, however important, is no substitute: a 2026 decision held that a shareholders’ agreement not adopted into the articles does not bind the company or its board.

1. What the articles are in law

“Every company shall have articles” (section 15), in force from incorporation (section 16). Section 17(a) defines their status as a three-way contract – between the company and each shareholder, and among the shareholders – and section 17(b) adds that they change only in the manner the Law provides. Two things follow. First, anyone who joins the company later – an investor, an employee who exercised options, an heir – is bound by the articles from the moment of entry in the register of shareholders, without signing anything. Second, the Supreme Court has held that the articles are interpreted under contract law but never beyond their clear wording, precisely because future shareholders cannot be bound by what was not written in the founding documents (CA 54/96 Hollander v. HaMemad HaChadash Software Ltd, PD 52(5) 673). What is not in the articles does not bind those who did not agree to it.

The articles are also public: they are filed with the Registrar with the application for registration (section 8), open to public inspection on the register (section 43), and a copy is held at the registered office (section 124). Anyone paying ILS 39 to inspect the file sees them – competitors, suppliers, employees.

2. Why there are no “model articles”

The old Companies Ordinance had a schedule – the “model articles” – that applied to a company that did not provide otherwise. The Companies Law, 5759-1999, abandoned that model. In its place section 18 sets four mandatory items:

1. the company’s name;
2. the company’s objects – and “to engage in any lawful business” is permitted (section 32);
3. particulars of the registered share capital (sections 33–34);
4. particulars of the limitation of liability (section 35).

Section 19 lists what may be included: the rights and duties of the shareholders and the company; provisions on the management of the company and the number of directors; corporate-governance provisions from the First Schedule; and “any other matter the shareholders saw fit to regulate in the articles”. Everything not included is governed by the Law’s dispositive provisions. The Corporations Authority publishes a document titled “the default under the Companies Law for provisions in a company’s articles” and a short form of articles for a one-person company; the online system generates minimal articles for a shareholder filing alone (regulation 16B). None of these is a set of “model articles”, and websites saying such articles are “published in the Companies Law” describe law that has not been in force since 2000.

3. What the Law applies when the articles are silent

The table describes the defaults that apply to a private company whose articles contain only the four mandatory items – and what they mean for two founders holding 50:50, or three holding 40:40:20.

Matter	The Law’s default	What it means for founders
Amending the articles	Simple majority at a general meeting (section 20(a))	Whoever holds 51 per cent can rewrite the rules alone – including deleting every protection the minority thought it had.
Allotting shares	In the board’s power, up to the registered capital (sections 92(a)(9), 288); no pre-emption right unless provided	A board controlled by one founder can dilute the other without asking.
Transferability of shares	Free; “a company may provide in its articles a provision restricting the transferability of shares” (section 294)	Without a restriction a partner can sell to a competitor; a right of first refusal, tag-along and drag-along exist only if written.
Appointing and removing directors	The annual meeting appoints (section 59); the general meeting may remove a director by simple majority unless otherwise provided (section 230)	A minority founder without a protected appointment right can find himself off the board in one vote.
Board composition	At least one director (section 219(b)); a one-person board is possible (section 93); residual power lies with the board (section 49)	Without provision – no agreed chair, no casting vote, no deadlock mechanism.
Powers of the general meeting	A closed, non-waivable list (section 57): amendment of the articles, appointment of the auditor, capital changes, merger, winding-up; the articles may add matters (section 58(b)); the meeting may take over another organ’s power for a specific matter (section 50)	Any founder “veto” over business decisions exists only if written.
Meetings and resolutions	Annual meeting within 15 months (section 60); a private company may dispense with it except to appoint an auditor (section 61); unanimous written resolutions (section 76); meetings by any means of communication (section 77)	The reliefs exist – but only if the articles adopt them.
Dividends	A board resolution (section 92(a)(10)), subject to the profit test and the solvency test (section 302)	A founder who wants salary rather than dividend, or the reverse, needs a written arrangement.

Note what is not in the table: vesting of founders’ shares, an undertaking to invest, non-competition, intellectual property. On these the Law is entirely silent, and if they were not written – they do not exist.

4. What tailored articles do – with the Law’s own tools

• An entrenched majority. Section 20(b): a provision in the articles requiring a particular majority for amendment can be changed only “by that particular majority or by the proposed majority, whichever is higher”. A list of decisions requiring 75 per cent, or a named founder’s consent, thus cannot be deleted by simple majority.
• Limiting the company’s power to amend. Section 22 allows a company to restrict its own power to amend a provision of the articles – “in the articles or in another contract” – if resolved by the majority required for amendment. This is the statutory bridge through which mechanisms from a shareholders’ agreement take effect at company level.
• Share classes and class rights. Section 20(c): a change prejudicing the rights of a class of shares requires approval of a class meeting. “Founder A” and “Founder B” shares, each with the right to appoint a director, are the simplest way to secure representation.
• Transfer restrictions. Section 294: a right of first refusal, tag-along, drag-along, a ban on transfer to a competitor, a shotgun mechanism for deadlock – all are provisions on the transferability of shares, and belong in the articles so that they bind the company (which must not register a prohibited transfer) and any future buyer.
• Allotments and pre-emption. A pre-emptive right on allotment and a list of allotments requiring a special majority limit the board’s power under section 288. Delegation of an employee option plan to a committee (section 288(b)(1)) – in the article on section 102.
• The board. Number of directors, appointment rights, quorum, a casting vote or its absence, and what happens when the board is tied.
• Corporate governance. Adoption of provisions from the First Schedule (section 19(2A)), even in a private company, when an investor requires it.
• Reliefs. Sections 61, 76, 77, 93 – adopted expressly.

5. Articles versus a founders’ or shareholders’ agreement

A founders’ agreement (before or at incorporation) and a shareholders’ agreement (usually on an investor’s entry) are contracts between their signatories. The company is not a party unless expressly joined, and the board – which owes its fiduciary duty to the company, not to the shareholders who signed – is not subject to them. The decision that made this clear was given in March 2026 in CC 53928-02-24 Alon Blue Square Israel Ltd v. Triple-M Power Plants Ltd (Economic Department of the Tel Aviv District Court, Judge Zimmerman): a 2017 shareholders’ agreement between some of the shareholders, never adopted into the articles, does not bind the company or its board; the directors must exercise independent judgment for the company and may not lean on an agreement the company is not party to; and a shareholder who joined later is not bound by it. The agreement remains a cause of action between its parties – but not a tool to stop a decision of the company. The court relied, among others, on CA 6041/15 Hama v. Muller.

The opposite direction works: in CA 8817/02 Kliér Chemicals Marketing (1994) Ltd v. Atzmon (27 March 2008) the special-majority provisions of a shareholders’ agreement had been embedded in the articles, and a transfer of shares to a competitor made without that majority was held void; the Supreme Court added that the controlling shareholder had breached the duty of good faith in negotiation (section 12 of the Contracts Law) by concealing a concrete deal, and that in a “quasi-partnership” the duty of disclosure is heightened (sections 192–193 of the Companies Law). And in CA 9636/06 Bogner v. SofaWare Technologies Ltd (18 November 2009) a founder’s contractual veto survived his resignation from the board, because the founders’ documents had not conditioned it on serving as director – the wording of the document decided.

The firm’s position, in most companies: private matters stay in the agreement; mechanisms go into the articles. The articles are public, so founders’ pay, development timelines, valuations, detailed vesting schedules and non-competition clauses stay in the founders’ or shareholders’ agreement. Whatever must bind the company itself – transfer restrictions (section 294), the list of decisions requiring a special majority or a founder’s consent (section 20(b)), rights to appoint directors, a pre-emptive right on allotment, and a limit on amending those provisions (section 22) – is mirrored into the articles in short form. The articles can also refer to the shareholders’ agreement on defined matters: the reference does not make the agreement public, but it gives the matters listed effect at company level. What not to do is to write, in the articles or the agreement, that the agreement “constitutes the company’s articles” – wording we meet in templates, and which produces exactly the dispute over document hierarchy that the courts have had to resolve. On the founders’ agreement itself – in a separate article.

6. Amending the articles – rules and limits

The default is a simple majority at a general meeting (section 20(a)), and the amendment takes effect on the resolution and is reported to the Registrar within 14 days (section 21). Three limits: an entrenched majority changes only by that majority (section 20(b)); prejudice to class rights requires a class meeting (section 20(c)); and an amendment obliging a shareholder to acquire more shares or increase his liability does not bind him without his consent (section 20(d)). In companies incorporated under the Ordinance, with a memorandum, the default for amendment is 75 per cent (section 24) – a point that surprises owners of older companies who want to “update the articles”.

The majority is not entirely free even when it has the numbers. Section 192(a) requires a shareholder to act in good faith and in the accepted manner and to refrain from abusing his power, and expressly names the vote on amending the articles, on increasing the registered capital and on a merger; section 192(b) prohibits oppressing other shareholders. The remedy is section 191: the court may give any direction to remove the oppression, including ordering the majority or the company to buy out the minority, and the resulting changes to the articles are deemed duly adopted. It is an expensive and slow safety net; properly drafted articles avoid the need for it.

7. A checklist for the articles of two or more founders

1. Registered capital large enough for a first round and an option plan; a share class per founder if an appointment right is needed.
2. A list of special-majority decisions – and entrenchment of the list itself (section 20(b)) with a limit on the power to amend (section 22).
3. A pre-emptive right on allotment; allotments requiring shareholder approval.
4. Transfer restrictions: first refusal, tag-along, drag-along with a price floor, no transfer to a competitor (section 294).
5. Board composition, appointment rights, quorum, a deadlock mechanism.
6. A repurchase mechanism for a departing founder’s shares – the provision in the articles refers to the mechanism in the agreement; the conditions that preserve capital-gains treatment are a matter for tax advice.
7. The three “private company” restrictions for the balance-sheet exemption (section 175).
8. Reliefs: sections 61, 76, 77, 93.
9. Language – Hebrew or English (regulation 1(d)) – according to who will read it.

On the procedure by which the articles are filed, the fees and the documents – the company registration guide; on the service as a whole – company formation at the firm.

Frequently asked questions

Are there standard articles I can simply use?

Not in the Law. The “model articles” (takanon matzui) were a schedule to the old Companies Ordinance; the Companies Law, 5759-1999, did not carry them over, and instead set four mandatory items (section 18) and a list of defaults that apply when the articles are silent. The Corporations Authority publishes an explanatory document on the defaults and a short form of articles for a one-person company; the online system generates minimal articles for a shareholder who files alone. Websites saying the model articles are “published in the Companies Law” describe the law before 2000.

What must the articles contain?

Four items only (section 18): the company’s name; its objects (“any lawful business” is permitted – section 32); particulars of the registered share capital (sections 33–34); and particulars of the limitation of liability (section 35). Everything else is optional (section 19) – which is exactly what makes one-page articles dangerous for two or more founders.

Can a founders’ agreement replace the articles?

No. Every company must have articles (section 15), and “the articles are as a contract between the company and its shareholders and among the shareholders themselves” (section 17(a)). A founders’ or shareholders’ agreement is a contract between its signatories only. A 2026 decision (CC 53928-02-24, Tel Aviv Economic Department) held that a board is not subject to a shareholders’ agreement that was not adopted into the articles, and may not even take it into account in exercising its judgment. The agreement remains binding between its parties.

Are the articles public?

Yes. They are filed with the Registrar of Companies and open to public inspection (section 43), and a copy is kept at the registered office (section 124). That is why commercially sensitive matters – founders’ pay, timelines, valuations – stay in the founders’ agreement, while the mechanisms that must bind the company – transfer restrictions, special majorities, appointment rights – go into the articles.

How are the articles amended?

By simple majority at a general meeting, unless the articles require another majority (section 20(a)). A provision requiring a special majority can be changed only by that majority or the proposed one, whichever is higher (section 20(b)); a change prejudicing the rights of a class of shares needs a class meeting (section 20(c)); no shareholder can be compelled to invest more (section 20(d)). The change takes effect on the resolution and is reported to the Registrar within 14 days (section 21). In companies incorporated before 2000 with a memorandum, the default is 75 per cent (section 24).

Can the articles be in English?

Yes. Regulation 1(d) of the Companies Regulations (Reporting, Registration Particulars and Forms) permits articles in English (not for a public-benefit company). With foreign founders or investors this saves translations and disputes over wording.

The above is general information on Israeli law only, current as of the date of publication, and does not constitute legal advice or a substitute for advice on your specific circumstances. Fee amounts are the official 2026 figures published by the Israeli Corporations Authority and are updated annually. Anything concerning tax should be checked with a tax lawyer or a CPA. Consult a lawyer before acting.

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