Shareholders Agreement in Israel: Template, Key Clauses and Local Law (2026)

A shareholders agreement (SHA) is the private contract between the owners of a company. It decides how they share control, money and the exit, and it covers the ground that the statute and the company's articles leave open. In Israel an SHA sits alongside the Companies Law, 5759-1999 and the company's articles of association. Israel is also a startup-heavy market, so SHAs here are shaped heavily by venture financing: founders, investors, vesting and preference terms. This guide explains the law, the key clauses and a skeleton. It is general information, not legal advice; take Israeli counsel before you sign. ## What does a shareholders agreement do? An SHA answers the questions the statute does not: who gets a board seat, which decisions need special consent, how shares can be transferred, what happens on a founder's departure, and how investors protect their money. It binds the shareholders who sign it. The company's articles of association, by contrast, bind the company and every shareholder and are the public constitutional document. Where the two could conflict against third parties, the articles govern, so protections that must bind the company are usually mirrored in the articles. ## The law that governs companies in Israel | Area | Governing source | |------|------------------| | Companies, directors, shareholder rights | Companies Law, 5759-1999 | | The SHA as a contract | Contracts (General Part) Law, 5733-1973 | | Listed companies and securities | Securities Law, 5728-1968 and ISA rules | The Companies Law 5759-1999 is the primary statute governing all registered companies. It sets out the organs of the company, directors' duties, and certain basic shareholder rights, including that a holder of at least 1 percent of the voting rights can request the board to add an item to the agenda of a general meeting. An SHA can supplement these but cannot override a mandatory provision of the Companies Law. ## Why venture terms shape Israeli SHAs Many Israeli SHAs are investment agreements in substance. Expect preferred-share mechanics: liquidation preferences, anti-dilution protection, pre-emption on new rounds, information rights, and protective (veto) provisions for investors. Founders bring vesting and leaver provisions. If your company has raised or will raise venture capital, the SHA has to carry these cleanly and align with the articles, because inconsistency between the two is where later funding rounds get stuck. ## Key clauses in an Israeli shareholders agreement ### 1. Share capital and classes Record the shareholdings, the ordinary and preferred classes and their rights, and the mechanics for issuing further shares. ### 2. Governance and the board Board composition, nomination rights, quorum, and how the chair is chosen. Set out observer rights where investors expect them. ### 3. Protective provisions and reserved matters The decisions that need special or investor consent (new financing, changing share rights, selling the company, large spending, related-party deals). This is the heart of minority and investor protection. ### 4. Transfer of shares Pre-emption rights, rights of first refusal, lock-ins and permitted transfers. Make the mechanics precise. ### 5. Tag-along and drag-along Tag-along lets minority holders join a sale on equal terms; drag-along lets a qualifying majority force a clean exit. Draft both carefully. ### 6. Preference and anti-dilution Liquidation preference on an exit and anti-dilution protection on a down round, where investors are involved. ### 7. Founder vesting and leavers Vesting schedules and good-leaver and bad-leaver treatment, so a departing founder does not keep unearned equity. ### 8. Information and dividends Reporting rights for investors and the dividend policy. ### 9. Confidentiality, non-compete and good faith Reasonable restraints, protection of confidential information, and an express good-faith standard consistent with Israeli contract law. ### 10. Relationship with the articles State which document prevails between the shareholders, and commit to amending the articles so the SHA binds the company where it must. ## A short shareholders agreement skeleton 1. Parties and recitals 2. Definitions 3. Share capital and classes 4. Governance and board 5. Protective provisions and reserved matters 6. Transfer restrictions, pre-emption and rights of first refusal 7. Tag-along and drag-along 8. Liquidation preference and anti-dilution 9. Founder vesting and leaver provisions 10. Information rights and dividend policy 11. Confidentiality and non-compete 12. Relationship with the articles of association 13. Governing law and dispute resolution 14. Signatures Use this as a structure to adapt with Israeli counsel, aligning every clause with the articles and the Companies Law. ## Common mistakes - An SHA that contradicts the articles, so the key protection fails against third parties.

• Trying to override mandatory Companies Law provisions.
• Preference and anti-dilution terms that conflict with the articles, stalling the next round.
• Vague leaver provisions that let a departing founder keep unvested equity. ## Keeping the cap table and the agreement in sync An Israeli SHA is a living document that each funding round rewrites: new preferred classes, new preferences, refreshed vesting, updated reserved matters. Teams that keep the SHA, the articles and the cap table in separate files discover the conflict mid-round, at the worst time. The idea behind an AI contract workspace is to hold the agreement, its versions and its key dates in one place: draft from a tested template, see each clause flagged where it is unusual or at odds with standard terms, edit clauses in plain language, and keep a live timeline so an amendment, a transfer or a vesting date never slips. On jurisdiction depth, Adira is India-first today with other jurisdictions on its roadmap, so for Israel-specific drafting it supports the workflow while local-law depth is built out; you can read more at Adira. One source of truth beats three documents that disagree when the next investor starts diligence.