The Registered Association Where You Worked Collapsed? There is Someone to Help You!

Writer: Rachel Ben-Rahamim Sobol, Attorney.

In recent years, due to government cutbacks in the budgeting of Registered Associations, many have found themselves in financial difficulties. Following these cutbacks, some have held back their employees’ salaries, have not transferred the social benefits to the respective insurance companies, and in many cases, because of their financial situation, have not paid their employees the salaries due.

To the extent that this is not a temporary situation and whose solution is not apparent, it is possible that a Registered Association (“Amuta”) will dismiss its employee staff or cease activities.

The main victims as a result of this situation are the employees of the Amuta, whose source of livelihood is in danger along with the uncertainty regarding the payment of the salaries due to them for their employment at the Amuta, or in the event of dismissal.

What Can Employees Do?

In my experience, one of the most important issues in such a process is the “unionization” of the employees into one collective group. The larger the group of employees, the greater the power of the employees in proceedings they will undertake or will be taken by any other entity, such as the Registrar of Registered Associations, the creditors of the Amuta, and other parties.

In this situation, the employees must submit a request to the District Court to liquidate the Amuta. If the Amuta has not yet discontinued its activities, in addition to the petition for liquidation, the employees must submit a petition for the appointment of a temporary liquidator. Upon appointment of said liquidator by the Court, said liquidator will be given the authority to manage and run the Amuta.

After the Liquidation Order has been issued by the Court, the employees will be entitled to claim their salaries and severance pay from the National Insurance Institute.

According to the National Insurance Law, only after the Court has issued a Liquidation Order, may the employees submit a claim with the National Insurance Institute for benefits in respect of the salary obligations owed to them by the Amuta, including debts for vacation days not drawn, recuperation benefits not paid, prior notice, unpaid overtime over the last year of their employment, and the unpaid 13th month salary. In addition, the employees are entitled to claim as part of their claims submitted to the National Insurance Institute, the severance pay that the Amuta still owes them.

The benefits paid by the National Insurance Institute to the Amuta’s employees in the event of the Amuta ‘s liquidation is limited to a ceiling of NIS 112,000 gross per employee.

In addition, after any Permanent Liquidation Order is issued, the insurance companies that held the employees’ deposit funds, will have the right to sue the National Insurance Institute for the employer’s and employees’ shares of the social benefits that were not transferred to the respective insurance company funds. This claim is limited to NIS 17,000 per employee, for all funds opened in their respect by the Amuta, regardless of it being a pension fund, an advanced study fund, an executive insurance policy, or other types of funds

How to File a Claim with the National Insurance Institute?

In contrast to claims for unemployment benefits, maternity allowance, and the like, these claims are not submitted directly to the National Insurance Institute, but according to law, these claims must be submitted to a liquidator. The lquidator can be an attorney or accountant who was appointed by the Court to examine the employees’ debt claims and to resolve them. After the liquidator, has examined the employees’ debt claims, he must transfer them to the National Insurance Institute for payment.

What to do if There is a Creditors’ Arrangement?

Sometimes when a Temporary Liquidator is appointed, and to prevent a situation where the Amuta is liquidated, the Temporary Liquidator succeeds in recruiting an investor who is willing to invest money in the Amuta and thus prevent its liquidation. There is no doubt that to prevent the Amuta’s liquidation, the new investor must invest sufficient funds in the Amuta so that it will be possible to form a creditors’ arrangement that will include all Amuta creditors.

In a situation with a creditors’ arrangement, the employees must ensure that payments made to them within the framework of the arrangement, will not be less than the funds to which they are entitled should the Amuta be served a Liquidation Order.

In conclusion, in light of the fact that these are complex proceedings being conducted in Court and that there are conflicting interests in these proceedings among the creditors. In my extensive experience in dealing with hundreds of Amuta employees, I recommend that employees organize themselves as early as possible and appoint a representative and a lawyer to represent them during the proceedings. Doing this means there will be someone to look after their interests, their rights, and the payment of the obligations owed to them by the Amuta in the best possible manner.


*This article is not meant to constitute legal advice for a particular client, for which consultation with a qualified attorney is required.