When real estate is owned through a company rather than directly by individuals, dissolution of the property partnership requires addressing both the corporate structure and the real property. This creates a two-layer legal challenge.
Company Ownership of Real Estate in Israel
Many real estate investments in Israel are made through companies, particularly limited liability companies. This structure offers certain tax and liability advantages but adds complexity when the shareholders want to exit the investment.
The shareholders own the company; the company owns the property. To divide the property between shareholders, the corporate structure must first be addressed.
Options for Unwinding Company-Held Real Estate
Shareholders who want to exit a company-held real estate investment have several options. Selling their shares in the company rather than the underlying property. Arranging for the company to sell the property and distribute the proceeds. Converting the company ownership to direct personal ownership and then proceeding with personal-ownership dissolution.
Each option has different tax, legal and practical implications.
Tax Considerations
The tax treatment of company-held real estate dissolution is complex and differs significantly from personal ownership dissolution. Capital gains within the company, distribution of proceeds to shareholders, and potential stamp duties and other levies must all be considered.
An attorney working alongside a tax advisor with corporate and real estate expertise is essential.
Minority Shareholder Rights
When one shareholder wants to exit a company holding real estate and the others don’t, the minority shareholder’s rights depend on the company’s articles, any shareholders’ agreement, and applicable company law. An attorney will identify what rights the minority shareholder has and how to exercise them effectively.
The Role of the Company in Proceedings
Court proceedings for dissolution of company-held real estate may need to be brought both against the company and against the co-shareholders. Understanding the proper procedural framework is important for pursuing these claims effectively.
