A foreign fund seeking to acquire a meaningful stake in an Israeli technology company now faces a compliance step that did not exist two years ago. Israel's investment screening regime has been significantly strengthened, and international investors who miss the notification window risk having their transactions blocked, unwound, or subjected to conditions that fundamentally alter deal economics.
Israel's foreign investment screening rules now impose mandatory pre-closing notification obligations on foreign acquirers crossing defined ownership thresholds in sectors designated as sensitive to national security and critical infrastructure. The notification must be filed before the transaction closes, and the reviewing authority has a fixed statutory period to respond. Failure to notify triggers penalties and may render the transaction void.
This alert sets out what changed, which companies are affected, the compliance deadline, and the immediate actions international investors must take.
What changed and when it took effect
Israel's investment legislation has historically focused on specific industries – defence, telecommunications, and critical infrastructure – through sector-by-sector approvals. The revised regime introduces a horizontal screening mechanism. It applies across a broader set of industries and standardises the notification procedure under a single regulatory body.
The key change is the introduction of a formal haggashat hoda'a (pre-transaction notification) obligation for foreign investors. Under the updated investment legislation, a foreign person or entity acquiring an interest above the applicable threshold in a covered Israeli business must submit a notification before the transaction closes. The authority then has a defined review period – typically measured in weeks – to assess the transaction, request additional information, approve it unconditionally, impose conditions, or initiate a deeper review.
The revised rules took effect in the first half of 2025. Transactions signed after the effective date fall squarely within the new system. Transactions that were signed but not yet closed as of the effective date may also be subject to the obligation, depending on when control or beneficial ownership transfers.
The disclosure obligations under the notification form are substantive. Investors must provide details on ownership structure, ultimate beneficial ownership, source of funds, and the intended post-acquisition governance arrangements. For investment fund structures with layered ownership, this requires tracing beneficial ownership to the natural-person level – a process that can take several weeks to compile accurately.
Who is affected and what thresholds apply
The screening regime applies to foreign persons and foreign-controlled entities acquiring interests in Israeli companies operating in designated sensitive sectors. The categories currently covered include:
- Defence technology and dual-use goods manufacturers
- Telecommunications and digital infrastructure operators
- Critical energy and water infrastructure
- Companies handling sensitive personal data at scale
- Advanced technology businesses with applications in national security contexts
The notification threshold is triggered when a foreign acquirer reaches or exceeds a defined ownership or control percentage in a covered entity. The legislation also captures indirect acquisitions – where the foreign investor acquires a holding company or an intermediate vehicle that controls a covered Israeli business.
Investment funds structured outside Israel are explicitly within scope. A foreign investment fund acquiring shares in an Israeli-listed company through a prospectus-based securities offering or a secondary market transaction is not automatically exempt. Where the acquired stake crosses the threshold, the notification obligation applies regardless of the acquisition method. Similarly, a transaction structured as a convertible instrument or an option may trigger notification obligations if conversion or exercise would result in crossing the threshold.
Israeli companies listed on foreign exchanges. including those with dual listings under the Rashut Nirot Erech (Israel Securities Authority) IPO and listing requirements. are not exempt simply because the acquisition occurs on a non-Israeli exchange. The nationality of the target, not the venue of the transaction, determines jurisdiction.
Greenfield investments and purely passive minority stakes below the threshold are generally outside the screening obligation. However, passive status is assessed substantively: board representation rights, veto rights, or information access rights that confer practical influence may bring a technically sub-threshold stake within scope.
To assess your transaction's exposure to Israel's screening regime, contact us at info@ferrazwhitmore.com.
Immediate actions for international companies
The compliance deadline for any covered transaction is pre-closing. There is no cure period for late notification – a failure to notify before closing is a substantive breach, not a technical one. The following actions should be taken without delay.
Map the target's sector classification. Determine whether the Israeli target operates in a designated sensitive sector. Sector classification is not always obvious. A software company providing analytics tools to government clients may be classified as sensitive even if it has no direct defence contracts. Legal counsel with experience under Israeli investment legislation should conduct this assessment.
Identify the applicable threshold. Confirm the relevant ownership percentage trigger for the specific sector. Different sectors carry different thresholds. Confirm whether any pre-existing ownership by the same acquirer or related parties is aggregated toward the threshold.
Compile ultimate beneficial ownership documentation. The notification form requires disclosure down to the natural-person level. For structures involving an investment fund, a trust, or a multi-tier holding arrangement, this compilation should begin immediately. Delays in obtaining documentation from upstream entities frequently cause deals to miss their target closing dates.
Build the review period into the transaction timeline. The statutory review period must be treated as a hard closing condition. Deal timelines that assume a two-week regulatory gap are routinely insufficient. Practitioners advising on Israeli transactions recommend building a buffer of at least six to eight weeks from notification submission to anticipated clearance.
Review all related disclosures for consistency. Any prospectus, securities offering document, or disclosure filing made in connection with the transaction must be consistent with the notification submitted to the screening authority. Inconsistencies between the investor's public-facing securities disclosures and the screening notification create significant legal exposure under both investment legislation and securities law.
For companies with existing Israeli investments, a review of current holding structures is also warranted. Changes in upstream ownership – such as a fund restructuring or a change in the fund's own investor base – may independently trigger notification obligations even without any change at the Israeli target level.
Companies with questions about how these rules interact with banking and finance regulations in Israel should consider a consolidated review, as cross-regulatory obligations frequently arise in the same transaction. For a broader view of how investment screening developments in the region compare, our alert on foreign investment screening in the UAE covers parallel developments in that jurisdiction.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our capital markets and cross-border investment practice covers foreign investment screening, securities offering compliance, and disclosure obligations across Asia-Pacific, Middle Eastern, and high-growth markets. We work with international investors, investment fund managers, and in-house legal teams who require results-oriented counsel when entering regulated markets. Engaging a lawyer in Israel with cross-border capital markets experience is a practical necessity under the new notification regime. our team supports clients at each stage of the screening process. From threshold analysis to notification filing. As an international law firm advising on Israeli transactions, Ferraz & Whitmore provides a single point of coordination across the regulatory and transactional workstreams. For a preliminary review of your investment structure and notification obligations, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.