Two Types of Nonprofits

In Israel there are the two major kinds of non-profit organizations as legal corporations: amuta and cheletz. However, the amuta is registered under the Amutot (associations) Registrar while the cheletz, as a hybrid organization, is registered and accountable both to the Amutot Registrar as well as the Companies Registrar.

At one point there was no such thing as a cheletz, but then registered private companies asked to be recognized as nonprofit corporations (for example, if a religious publishing company is not profitable and wants to receive donations), so their serial number as a company and other aspects were maintained, while they functioned as a nonprofit organization and were accountable to relevant legal demands and categorization.

What are the differences between an amuta and cheletz and how do you choose the appropriate categorization?

The main differences are as follows:

1. Technical differences. As previously mentioned, in order to register a cheletz, one must deal with the Amutot Registrar and the Companies Registrar. For example, the registration fee is collected by the Companies Registrar, some annual forms must be delivered to the Amutot Registrar, and other forms and organizational changes must be reported to the Companies Registrar. Also, a low-budget amuta without employees is not obligated to involve an accountant for routine bi-monthly updates, while a cheletz is always obligated to do so (similar to a private company). Another notable difference regards who runs the cheletz. While an amuta is always under the authority of a group of individuals with equal power, a cheletz may be “owned” and controlled entirely (or disproportionately) by one person or corporation.

2. Conceptual and structural differences. For some, a nonprofit organization is considered to be more professional than an amuta, or more familiar to those accustomed to working with private companies. The main difference regards the structure and terminology, which are significant beyond the technicalities; the amuta is comprised of board members (who hold executive power), amuta (or general assembly) members, and an advisory board, while the cheletz is comprised of directors (who hold executive power), shareholders (who function as a general assembly), and an advisory board. Company shareholders tend to perceive themselves as more authoritative than the directors, as owners, while amuta board members usually perceive themselves as greater than the amuta members whose function is hierarchically less significant.

It is worth noting that over the years the Corporations Authority continues to make changes to narrow the gap between an amuta and cheletz. We may expect, as time goes by, more changes will be made, and perhaps at some point the cheletz hybrid will disappear.

#regulations