The concept of incorporation is an old one, formed during the 17th century with the primary objective of encouraging the creation of business ventures and relations, while maintaining the personal exposure of the entrepreneur to the business’s debts and risks resulting from the establishment of the enterprise, at a minimum. An additional principle was derived from this aim – on a given time period when there is a proper and healthy business management, the Company’s potential for longevity is infinite.
Thus, a limited Company, an artificial legal entity, will cease to exist upon its removal from the entries of the Companies Registrar. Indeed, unlike a human being whose life ends with his last breath, in some cases, it is possible to turn the clock back and order the revival of a Company for a specific objective. Upon the fulfillment of these objectives, the most appropriate entity in the eyes of the court will act for the final and complete dissolvement of the Company. In general, the revival of a Company is a legal procedure that is determined by the court. Below are the main reasons for using this unique procedure.
Reasons for revival:
Company revival is a unique and significant legal procedure in the legal landscape.
The revival procedure reinstate authority to Company’s officers to act on behalf of the Company, and the Company’s resolutions become valid again. Therefore, the revival of a Company is an activity with consequences for the Company’s officials, its shareholders, and at times its various creditors.
The reasons for submitting a request for the revival of a Company can be divided into two types:
The first type is characterized by requests relating to actions aimed against the Company, for example a claim for Company debts to creditors, suppliers, or any other entity. In addition, in specific cases, a Company is revived in an attempt to take legal proceedings against the shareholders, as well as examine the Company managers’ personal liabilities. Other cases in this regard derive from the wish to exercise legal rights which arose prior to the Company’s dissolvement. Consequently, these actions are characterized by exercising rights targeted at the Company itself, and sometimes even taking legal actions against the Company, due to its debts or business conduct while it was still active.
The second type is characterized by actions aimed at realizing rights against the Company as a legal personality. Without the reviving procedure, the applicant would face a hopeless situation, unable to receive any adequate relief to his problem. These acts are characterized as one-time and single acts, after which the Company is to be dissolved again. The most common causes are related to the completion of transfer of real estate rights that have yet to be transferred or registered due to the Company’s dissolution or removal from the registry, handling of registration, settlement of rights in block- parcel Companies and carrying out crucial actions required of the Company, subject to its contractual obligations.
Procedure
As mentioned above, the decision regarding a Company’s revival is made in the framework of legal proceedings within the jurisdiction of the District (“Mehozi”) Court. The process of reviving a Company is carried out in the framework of an opening motion, an expedited procedure based almost entirely on statements and without any substantial evidentiary hearings. The normative source on which the applicant relies is the Companies Ordinance.
It is important to mention that it is necessary to distinguish between two situations in which the Company is inactive: (1) The dissolution of a Company, in which the shareholders and Company managers are aware of the Company’s condition and have carried out a series of actions (on their own behalf or by their debtors) for the dissolution of the Company , or alternately; (2) A Company’s deregistration, a unique sanction that was granted to the Companies Registrar prior to the entrance of the Companies Law of 1999, in its current version. Via this sanction, the Companies Registrar is granted the authority to deregister a Company from the Companies Registrar records. This is a technical procedure, in which the Company’s directors and officials are not an active side of the process, and often are not even aware of. In such cases, Companies deregistered from the Companies Registrar were able to continue its business activities, carry out transactions, and make obligations, all while the Company is not registered and/or recognized by the statutory entity responsible for settling its registration.
The court maintains the authority to make a decision regarding the Company’s revival procedure, which is limited to a period of two years from the day it was deregistered from the Companies Registrar. In contrast, in a reviving procedure of a Company that was deregistered by the Companies Registrar, the procedure is limited to twenty years from the date of its deregistration. However, an order may at times be issued to revitalize the Company after the aforementioned period, insofar as an extension request for the Company’s reviving is submitted as part of the motion. The legal logic behind granting an extension is to prevent a situation in which the applicant finds himself unable to settle his affairs due to the final dissolution or deregistration of the Company.
Since the procedure is unique in the legal landscape, the applicant must assure the request’s uniqueness and ensure that it does not include additional remedies and/or requests, even if they assist in the proper and correct management of the Company’s revival and the option of its operation. Therefore, in Motion 32524-01-14 Mor vs. the Ministry of Justice (not yet published), the proceedings were dismissed due to a lack of uniqueness in the request for the Company’s revival. Thus, it was determined that a motion to revive a Company which is not exclusively unique to this relief, may lead to its dismissal. In the aforementioned proceedings, the Honorable Judge Orenstein ruled that the proceedings be dismissed due to a request for additional remedy, which included the appointment of a receiver in the framework of the motion.
Similar to a notice on voluntary dissolution, during the reviving of a Company it is necessary to publish a notice regarding the Company’s revival in a widely distributed newspaper. However, the ruling states that the publication is not a precondition for the approval of the Companies Registrar to the Company’s revival [1].
After the objective of the Company’s revival has been completed, the Company must be dissolved once again, thus completing the additional temporary life cycle granted to the Company.
Summary
The process of reviving a Company is a unique procedure in the legal-corporate landscape. This procedure has great significance to the Company officials, shareholders, and the rest of the Company’s organs who return to carry out their roles [2] after they have already come to terms with the fact that the Company has ended its operations.
After all actions for which the Company was revived have been completed, the Company will be dissolved again. Nonetheless, the Company’s revival is a beneficial procedure for settling debts and rights, without which the creditors and/or other third parties could not have received their payment from the Company’s liabilities and/or exercise their rights.
[1] In this regard, please see Motion (Tel Aviv) 35691-02-17, Tirat, Block 8274 Parcel 109 Ltd. versus the Companies Registrar & CO. (published in Nevo, 8.9.2017).
[2] It is necessary to mention in this regard that it is sometimes not possible to locate the company’s officials, directors, and shareholders, which makes it difficult to carry out the required actions for which the company was reinstated.