Dear Clients and Friends,
The Disclosure Duty for Those Supported by a Foreign State Entity Law (Amendment), 2016 (the “Law”) was approved by the Knesset plenum in second and third readings on July 12, 2016. This Law will enter into force on January 1, 2017 and will apply to donations which have been received as from that date.
The Law, which is unofficially named the "Transparency Law", includes amendments to three laws: the Non-profit Organizations (Amutot) Law - 1980, the Companies Law - 1999, and the Disclosure Duty regarding Those Supported by a Foreign State Entity Law - 2011.
The Law imposes increased reporting and disclosure duties on non-profit organizations and public benefit companies (together, "NGO's"), the main funding of which is derived from foreign state entities.
It should be noted that the Amutot Law, in its current version, defines the term "foreign state entity" in a relatively broad definition, according to which (1) a foreign country, including union, organization or a group of foreign countries ("foreign union"); an organ, authority or an agency of a foreign country or a foreign union; a foreign local or district authority, governmental authority of a foreign country or of a country which is a member of an alliance of countries in a foreign country ("foreign body"); union, organization or a group of foreign bodies; (2) the Palestinian Authority as defined under Israeli law; (3) a statutory corporation incorporated under the law of one of those mentioned in section (1) or (2) or if such body holds more than a half of a certain means of control in a corporation or in the event such body appointed a corporation to act on its behalf; and in addition (4) a foreign company which its annual turnover during the last fiscal year for which it had to file financial statements was mainly originated from any of the bodies listed in section (1) to (3) above, are all meeting the definition of "foreign state entity".
The Law determines that non-profit organizations (“NGO's”), which benefit from funding by foreign state entities, will be required to report such funding in their annual report to the non-profit organizations Registrar or the Endowments Registrar, pursuant to the matter.
The NGO will also be required to mention in its annual report that the names of the foreign state entities from which they have received the donations, are listed on the Registrar's website. In addition, NGO's shall be required to indicate such funding in publications which are aimed at and available to the public in billboards, television, press or the internet and which were intended for the promotion of their goals, in their applications via mail and email to public workers and elected public officials and in the reports they draft and distribute to the public.
The Law also determines that in the event that an NGO operates an on-line website, it shall be required to publish on such website the fact that its main funding derives from foreign state entities.
An NGO which will not comply with one of the reporting duties, mentioned above, will be subject to a financial penalty. A charitable company which will not conform to one of these reporting duties might expose itself to additional financial sanctions.
Lastly, it was determined that a representative of a NGO in which the main funding is as mentioned above, which actively participates in a meeting of a Knesset committee, will be obligated to bring this fact to the attention of the committee's chairman. If in the process of the meeting, the representative is asked by a Knesset member if he is a representative of a NGO, in which the main source of funding is as mentioned above, then that person will be under a duty to reply to that question.
For the publication of the Bill in the official records - Press here
We will be glad to be at your service for any question or clarification.
Herzog Fox & Neeman
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