Nonprofit Corporations

In this first post we ask: What is a corporation? For many of us who do not have a background in the concept of incorporating in one way or another.

Individuals (citizens, residents, etc.) and corporations (private companies, other organizations) are legal entities possessing an official serial number under the auspices of a nation-state. An individual is a simpler matter than a corporation, which is comprised of a plurality of individuals, interests, and legal conditions. For example, when an individual opens a bank account, it is straightforward, but a corporation requires much paperwork and protocol for signatories and ownership.

In Israel, individuals are processed under the governmental Ministry of Internal Affairs, whereas Corporations are registered by the Corporations Authority (רשות התאגידים), which operates under the Ministry of Justice (or, legal matters). Within the structure of the Corporations Authority, there are several “registrars,” which are basically categorical departments for different types of corporations. The two main ones are the Registrar of Companies (רשם החברות) and the Registrar of Associations (rasham ha’amutot). [There are more registrars for other corporations and registered items such as sacred properties (רשם ההקדשות) and pledges (משכונות), but these are irrelevant to the subject at hand.]

What is an NGO and how does it compare to an Israeli association?

An NGO is a non-governmental organization, which should be differentiated from an inter-governmental organization (IGO). An IGO is an association of governments, typically an international organization with the membership of states (such as the United Nations or the International Monetary Fund). An NGO is also a nonprofit organization, but it lacks official state membership. NGOs and IGOs are nonprofit organizations or associations, as opposed to for-profit companies or corporations (private and public). The term NGO is commonly used to refer to an ordinary nonprofit organization.

It is also helpful to understand the differences between various sectors. There is the first or “public” sector (government institutions); the second or “private” sector (for-profit companies); and the third sector (nonprofit organizations). [It is interesting to note that some now speak of a fourth sector as well which deals with “social business,” but this is not a proper category at the present.] The distinction between the three sectors in Israel is noted by the serial number for each sector: public institutions have a nine-digit number beginning with 50, companies have a nine-digit number beginning with 51, and associations have a nine-digit number beginning with 58. [Foreign nonprofit corporations with a registered branch in Israel begin with 56.]

The distinctions we have made so far are: 1) individual vs. corporation, 2) NGO vs. IGO, 3) first, second, and third sectors, and 4) nonprofit and for-profit corporations. An additional and final distinction is: Association, amuta in Hebrew, which is different from a public benefit company (PBC) or charitable company (CC), known in Hebrew by the acronym 'cheletz' (חל”צ = חברה לתועלת הציבור), meaning 'association for the public benefit.'

#regulations