Perhaps unsurprisingly, we at ERM are currently assisting several clients (both lenders and borrowers) to navigate material adverse change (MAC) provisions in this time of uncertainty.

A MAC clause is included in the vast majority of Israeli financing documents. As in other global financing documents, and broadly speaking, such provisions set a measure for when circumstances have changed drastically in respect of one party, so that the party will be deemed to have breached the agreement. Most commonly, the provision is applied to representations and warranties (e.g. ‘there is no litigation against the borrower that would result in a material adverse change to the borrower’s business’) or in events of default (giving lenders a catch-all provision that allows for the consequences of default to apply where circumstances have changed drastically).

Enforcing MAC clauses in Israel

The Israeli courts are generally willing to recognise the triggering of MAC clauses, especially in cases where the lenders were able to show that serious and longer-term doubts had arisen as to a borrower’s ability to repay its debt.

It should be noted however that apart from the usual considerations of the scope of the MAC clause, even a ‘subjective’ MAC clause (at the Lenders’ sole discretion) may be subject to the scrutiny of the Israeli court since any right under Israeli law is subject to the good faith principle. Moreover, as the principle of good faith is cogent under Israeli law, even an English law governed loan agreement brought before an Israeli court for enforcement, could be made subject to the good faith principle in certain circumstances, thus potentially limiting the Lenders’ discretion.

MAC vs Force Majeure

Whereas MAC clauses deal with foreseeable, yet undesirable, circumstances relating to a party, these clauses should be distinguished from issues relating to force majeure or frustration, which relate to unforeseen circumstances – for more on that, see our prior update here.

Is the COVID-19 pandemic a MAC

For many businesses in most industries, there is a strong chance that the COVID-19 crisis – being so unexpected, wide-ranging and deeply consequential – may well trigger MAC provisions. As always, the devil will be in the detail of the relevant contract. Assuming that the circumstances that would trigger the MAC cannot be argued to have frustrated the contract more generally (and thus provide ‘force majeure’ protection) – which is likely in view of Israeli courts’ outlook on frustration as set out in our previous note linked above – what can you do?

  • Consider the language of your agreement: which MAC provisions exist? Has the COVID-19 pandemic materially and adversely affected the borrower’s business? Could the lender reasonably assess the borrower’s business to have been materially and adversely affected? Would it be doing so in good faith?


  • Assess the consequences of a MAC: are defaults triggered? Are penalties and remedies already negotiated? May consequential effects (such as cross defaults) result?


  • Choose your next steps: Can a waiver be sought? Will a default be called? Might security be enforced?

If you are considering relying on MAC clauses in your contracts, or are at risk of having MAC clauses enforced against you, do not hesitate to contact us for advice on how best to handle any concerns.

Amnon Epstein   Jeremy Seeff



Since the outbreak of COVID-19 in Israel, we have witnessed three typical reactions with respect to M&A transactions: those who are aborting their transactions, before and after signing (whether they have a legitimate right or not); those who are still moving full steam ahead, sometimes subject to repricing and changes to the risk allocation matrix; and those who are well-funded buyers and are on the look-out for unique opportunities.

We were expecting to see many who fall within the first group, and we do see them. However, although it is still early days, a surprisingly large number of buyers and sellers are finding themselves in the second group. This is more common, naturally, in sectors less adversely affected by the virus (e.g., cybersecurity), as well as in sectors that actually benefit from it (digital work/life solutions, medical device, life-science, etc.). As a side note, it is interesting to see how COVID-19 helps separate ‘real’ technology businesses from those which merely wrap a real-world economy in a technological guise, and are actually real estate or travel businesses, for example. The third group is active to an extent, as many investors and buyers are still sitting on the fence.

In technology-driven Israel, M&A deals are forging ahead and are expected to continue to take place. However, carrying out such a transaction will require deeply updated thinking. Below are seven important points to consider when negotiating an M&A transaction in the COVID-19 era.

  1. Is your financing secured? Before launching, get enough comfort that you have funding in place (or take an informed risk, if the deal is compelling enough). Move fast with diligence, negotiation, and closing arrangements, to make sure that funding remains available. Mirror any protections included by your financiers in their financing documentation (financial covenants, material adverse change clauses, force majeure events, termination rights, etc.) in your sale and purchase agreement.
  2. Are you process-ready? Make sure you have a clear plan, and the required means and team, to remotely diligence the target business, negotiate the transaction, sign it, and close it.
  3. Is the target pandemic-ready? Make sure that the target business (from the production floor to board level) can adapt to, and endure the financial consequences of alternative working methods (home office, virtual meetings, etc.) and prolonged shutdowns. Confirm that the target business’s material contracts are “COVID-19 proof” and not too susceptible to termination or price adjustment.
  4. How do you prepare for the unexpected? Can any circumstances still be deemed unexpected? Pre-closing covenants, conditions to closing, and the definitions of material adverse change and force majeure events, all must be re-thought. Global case law on these matters will be thoroughly re-written in the coming months and years. Draft your contracts with that in mind.
  5. Can you rely on insurance? First, make sure that the target business insurance policies cover any losses that have already occurred or are likely to occur as a result of the crisis. Second, if contemplating warranty and indemnity insurance, make sure that the exposure you wish to protect against is not excluded (either as known risks or specifically if COVID-19 related).
  6. How will timing be affected? What does it mean for the parties? Think about new realistic timelines for fulfilling third-party closing conditions (merger clearance, other regulatory approvals, major customer/supplier change of control consents, etc.) considering potential delays resulting from the crisis (e.g., government officials on leave). Should such prolonged periods affect buyer/seller risk allocation? It should be noted that other than in a select group of highly coveted, competitive transactions, the market is in any case likely to be a buyer’s market, which will determine the basic risk matrix.
  7. Should specific COVID-19 provisions be negotiated? Consider whether to include specific COVID-19 warranties, disclosures, and indemnities, as a way of eliciting more information about the potential impact of the virus on the target business.

Every crisis presents an opportunity. This is even truer in a cutting-edge and highly dynamic market like Israel. The coming months will be challenging for all but may lead to extremely interesting outcomes for M&A players in such market.

Most importantly, we hope that everyone keeps healthy and safe.

Nimrod Rosenblum, Founding Partner and Head of Corporate and M&A

Given the vast economic impact of the Coronavirus (COVID-19) outbreak, governments around the world have been adopting a variety of stimulus packages aimed at helping businesses and individuals cope with the financial fall-out from the crisis. Israel’s caretaker government has also adopted several measures and is expected to adopt further measures in the coming days and weeks as the situation evolves. The most relevant of the existing measures are detailed below, together with some key highlights from other jurisdictions with important trade links to Israel.

Worker unemployment benefits

Employees who are put on unpaid leave for a period of 30 days or more by their employer, are entitled to claim unemployment benefit during the period of unpaid leave, provided that they satisfy the conditions of entitlement prescribed by the Israeli National Insurance Institute. This provides a ready-made mechanism enabling businesses to reduce and manage their costs in light of the Coronavirus crisis. In addition, though independent contractors are not ordinarily entitled to ‘unemployment’ benefits, there is significant pressure to alleviate the wide-spread loss of income for vast swathes of independent contractors, and it is expected that regulations will soon be put in place to assist, including potential small loans of up to NIS 6,000 per month or potentially greater assistance – all still to be seen. For more details and information, please see ERM’s bulletin here, and refer to the National Insurance Institute of Israel’s information page here.

Corporate Support:

  1. Loan Facility Guaranteed by the State of Israel.

Loans dedicated to helping small and medium-size businesses that are struggling with cash flow difficulties as a result of the Coronavirus outbreak are being made available and backed by the Israeli Government.

Application should be submitted with the following:

  • A declaration signed by the company, specifying the consequential connection between the Coronavirus outbreak and the company’s cash flow needs; and
  • A monthly profit and loss forecast for the coming year.

Maximum loan amount will be the higher of: (i) up to NIS 500,000 or (ii) 8% of the company’s annual turnover.

Required Security: 10% of the approved loan.

Loan period: up to 5 years and with respect to the revolving loan facility, the option of a grace period of up to 6 months.

For submissions, please contact: (i) GSE, or (ii) BDSK

For more details and information, click here. [Information in Hebrew]

  1. Innovation Grants of NIS 50 million:

The Israel Innovation Authority (IIA) has issued three calls for Israeli high-tech companies to submit plans to develop, test, and implement systems, products, or technological solutions to combat the challenges brought about by the Coronavirus pandemic and has pledged NIS 50 million for these purposes. Simultaneously, the IIA, together with the Ministry of Economy and Industry and the Manufacturers’ Association in Israel issued a joint call for proposal inviting factories manufacturing industrial products, designed to prevent, treat and contend with the Covid-19 virus, to submit requests for assistance for their technologically innovative R&D plans.

The IIA is offering financial support of 20%-50% of approved R&D expenses, and financial support of 60%-75% of approved R&D expenses for projects with the potential to have a unique effect on the advancement of the healthcare system and public health in Israel and abroad or that constitutes a technological breakthrough in its domain.

In order to expedite the submission, the request may be submitted immediately via a dedicated abbreviated submission form and will have a shortened response time – with responses expected within ten days of the last submission deadline.

The three calls for proposals are as follows:

  1. proposals for technological ideas or draft implementation in the concept stage which can help deal with the challenges posed by the Coronavirus;
  2. proposals for projects in the development, piloting, or demonstration stages (including semi-commercial implementation) that can help deal with the challenges posed by the Coronavirus; and
  3. proposals for R&D plans for industrial products designed to prevent, treat and deal with the COVID-19 virus.

For more details and information, click here.

  1. Delayed deadlines for VAT payments:

Bi-monthly VAT reports and payments in relation to January and February 2020 have been postponed until 27 April 2020.

Monthly VAT reports and payments in relation to January and February 2020 have been postponed until 26 March 2020.

Key highlights from other jurisdictions with important trade links to Israel:

United Kingdom

  • income support of 80% of wages up to a maximum of £2,500 per month and deferral of VAT payments until mid-June;
  • small business grant funding of £10,000 for certain businesses eligible for small business rate relief or rural rate relief;
  • funding of £25,000 for retail, hospitality and leisure businesses whose property’s rateable value lies between £15,000 and £51,000;
  • a loan scheme (the Coronavirus Business Interruption scheme) offering loans of up to £5 million for small and medium-sized enterprises, offered through the British Business Bank;
  • debt relief through the advancement of loans to larger companies from the Bank of England to help support liquidity and to help bridge coronavirus disruption to cash flows.

For more detail and information, click here.

United States of America

  • The Treasury Department and Internal Revenue Service announced on 21 March 2020 that the federal income tax filing due date is automatically extended from 15 April 2020 to 15 July 2020. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations, and other non-corporate tax filers as well as those who pay self-employment tax.

For more detail and information, click here.

  • On 20 March 2020, the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor, announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief is provided under the Families First Coronavirus Response Act (Act).

For more details and information, click here.

Germany –

  • Germany authorised its state bank, KfW, to lend out as much as $610 billion to companies to cushion the effects of the Coronavirus.
  • Businesses are to be offered insolvency protection, extending the period during which insolvency must be filed for, provided that the company sees reasonable prospects of restructuring successfully if such troubles result from the Coronavirus crisis.


We will be happy to answer any additional questions you may have. Feel free to contact any of us: Simon Marks, Partner Jeremy Seeff, Partner Bar Mor, Associate 


The spread of the COVID-19 (Coronavirus) pandemic in Israel and around the world has led to numerous guidelines from the Israeli Health Ministry, the latest of which strongly recommends organizations to allow their employees to work from home. ERM has addressed the labour law-related issues arising in this context in a recent bulletin. While remote working arrangements may be an important step to slow the community spread of COVID-19 from person to person, they present cybersecurity challenges and risks of data security breaches.

As a reaction to these challenges, the National Cyber Security Authority published the Telecommuting Protection Recommendations for Businesses and Organizations on March 11, 2020. These recommendations address security measures to reduce risks that could come with remote access to computer systems and the decreased possibilities to supervise employees. The following is a summary of these recommendations as well as additional measures that should be taken now to reduce cybersecurity risks.For the best identity related information, people can check here!

Technical Measures

Pursuant to the recommendations, remote access should be granted only through a device that is familiar to the company’s IT personnel, which usually means a company computer rather than the employee’s private device. Employees should log in through a secure interface only, the session should be recorded, and the recording should be saved for a certain time period.

The organization should not grant all of its employees general access to the entire information system. Instead, the advice is to separate the access to email from the access to sensitive information, which should be granted only in a restricted manner and to those employees who have a need to know such information. If such access is necessary, it should be granted only for the required period of time and only through the company’s computer. The access settings should be configured so that after a certain time in which the employee was not active the connection to the system is automatically disabled, in order to decrease the risk of unauthorized access.

Now more than ever it is important to make backups for all devices and the information stored therein. So that in the event a device is hacked or lost – both of which constitute a “security incident” – the information can be recovered.

Data Breach Response Plan

Each organization should also review its data breach and incident response plans to ensure that it is prepared for responding to any kind of security incident. If necessary, the plans should be updated to include the contact information of the IT security team and to ensure that the organization can respond adequately and swiftly also when working remotely.

Communication with Employees

In addition to learning how to utilize the payroll software, another essential aspect is to hold awareness trainings with employees on how to comply with security requirements. It is essential that the organization is aligned from top to bottom on these matters, even and especially when many employees have not been involved in information security before. As the current situation does not permit face-to-face training sessions, such training or instructions may be conducted as online webinars, or sent to employees as presentations or memos. Such training should include, among others, the following points:

  • Locking a device by means of a complex password or biometric means as well as locking the device automatically after it has not been used for a set period of time.
  • “Remember password” functions should be turned off when employees are logging into company information systems from their personal devices.
  • Enable 2-step access verification (2FA)wherever possible on any device.
  • Employees should separate work email inboxes from private email inboxes and create different passwords for each account.
  • Only known and secure Wi-Fi networks should be used to connect remotely.
  • Warning against phishing attempts or emails that may contain malicious software.
  • Limit or prohibit the use of external storage devices such as USB storage devices.


If you want to address cybersecurity risks in your organization, we will be happy to assist you.

In these turbulent times, effective crisis (and contract) management could be the difference between sustaining contractual relationships, or, in the worst case, the failure to maintain a going concern.

Whilst, like with many contractual questions, our clients’ risk profiles will depend on the wording agreed, we set out below some overarching guidance about force majeure application and some key steps to take now.

What is ‘Force Majeure’

The doctrine of force majeure seeks to relieve contractual counter-parties of their respective obligations in circumstances that are deemed to have been unpredictable (and out of their control). This concept usually finds itself applied as part of the doctrine of “frustration” when one or more contractual counterparties find themselves, by no fault of their own, unable to perform obligations, or able to perform them only in such drastically different circumstances, so as to have ‘frustrated’ the intention of the parties when signing their agreement.

Pursuant to Israeli law, the doctrine may be adopted in two principal ways:

Contractual Provisions

It is common for contracts governed by Israeli law to contain an explicit force majeure clause, which sets out the circumstances which constitutes a force majeure event. These will then typically provide for the consequential remedies. In such cases, Israeli courts will first seek to interpret the language of the contract, so as to establish the parties’ intent. Where pandemics, health crises or analogous terms have been included, it is likely that a force majeure will be deemed to have occurred.  Where there is no specific reference to such an event, it will be necessary to interpret the provisions to determine whether the list of events included was intended to be exhaustive or not, and whether other provisions may help to indicate the parties’ intent.

General Principles of Frustration

Where a contractual clause is interpreted not to include pandemic events within the scope of force majeure, or where there is no applicable clause,  Israeli courts may be called upon to invoke general principle of ‘frustration of contract‘ pursuant to section 18(a) of the Contracts Law (remedies for breach of contract), 5731-1970, which sets out as follows:

“Where the breach of the contract is the result of circumstances which the breaching party, when entering into the contract, did not know about, was not required to know about or which it did not foresee and was not required to foresee in advance, and could not prevent them, and the fulfilment of the contract in such circumstances is impossible or is fundamentally different from the agreement between the parties, a breach of the contract would not warrant enforcement of the contract which was breached or compensation [for such breach];”

Israeli courts have only ever allowed for a defence of frustration in a handful of extreme cases (not even where the claimed frustration arose out of acts of war) on the basis that the Israeli courts have repeatedly held all such events to be foreseeable in Israel.  Nevertheless, and given the unprecedented, and global scale of the current COVID-19 crisis, it is possible (though perhaps still not likely) that Israeli courts will adopt a broader and more permissive approach to claims of frustration in the current circumstances.

Naturally, given the nature of the remedy of frustration, this can only ever be fully assessed on a case-by-case basis.

What can you do?

Though none of us can know exactly how the current crisis will play out, we would encourage our clients to consider the following steps:

  1. Identify your most material contractual relationships:
    • Are they specifically susceptible to the current crisis (e.g. travel industry businesses)?
    • As many will be, are they indirectly susceptible to the current crisis?
    • Do they contain explicit force majeure provisions?
    • Do they relate to the employment or engagement of staff – in which case, ensure you are updated of the most recent (and frequently changing) regulations applicable to changing staff conditions;
  2. Consider what, if any, steps you should take to mitigate risks identified in relevant agreements, whether through additional preparatory steps to ensure compliance, renegotiation, or potential enforcement of applicable provisions; and
  3. Consider the need to include appropriately worded risk-allocation provisions in any new contractual relationships being negotiated, especially as the current crisis is likely to be deemed ‘foreseeable’ from this point onwards.


As ever, your Epstein Rosenblum Maoz (ERM) team stands at your side, ready to assist with all your contractual needs.

Please don’t hesitate to contact us.



Gideon Weinbaum, Partner                                     Jeremy Seeff, Partner

In light of the Coronavirus (COVID-19) outbreak and the continued attempts to prevent its arrival and spread in Israel, the Israeli Health Ministry instructions are becoming more and more stringent on a daily basis. As a result, various questions and dilemmas rise amongst our customers in relation to the extent of awareness and preparedness required by employers regarding their employees. Such dilemmas and questions are whether a worker can be required to work from home while in solitary confinement? Can an employer prohibit an employee from travelling to a foreign country declared as requiring quarantine upon return to Israel? Can an employee’s decision to travel to a foreign country requiring quarantine, despite an employer’s directive, be recognised as cause for disciplinary action which could be grounds for termination of employment? … and more.

Currently, no clear answers are available. Nonetheless, seeing the rapid spread of the Coronavirus and the rising alerts by the Israeli Ministry of Health, we consider it appropriate to bring to your attention the latest and most recent publications in relation to the virus, which are relevant to the workplace.

Who should stay in quarantine for 14 days?

With effect as of March 9, at 8pm, any person returning to Israel following that time, from any destination abroad, is required to enter quarantine for 14 days immediately upon return. Moreover, any person who has previously returned from Austria, Italy, Andorra, Germany, Hong Kong, Japan, Egypt, Macau, China, Singapore, San Marino, Spain, France, South Korea, Switzerland or Thailand, as well as any person who had a flight connection in south Korea or Italy, must remain in quarantine for 14 days upon return to Israel.

Any person who has been in the vicinity of a Corona carrier or patient must also complete a 14-day quarantine period.

Policy towards foreign citizens arriving in Israel

It is also of note that, beginning on 12 March 2020, non-Israeli citizens arriving in Israel will only be allowed to enter the country if they are able to prove that they have facilities suitable for quarantine. Nonetheless, the above is not applicable to foreign citizens of China, Macau, Hong Kong, Italy, Japan, South Korea, Thailand and Egypt, as citizens of these countries are not allowed to enter Israel at this time as per recent directives of the Israeli Population and Immigration Authority.

Employers’ responsibilities in relation to employees who are in quarantine

Pursuant to the Public Health Order (New Corona Virus 2019) (Instructions to Employers of an Employee under quarantine) (Temporary Order), 5780-2020: (a) an employer of an employee in quarantine shall not require or permit entry of such employee to the workplace; (b) an employer will not terminate the employment of an employee under quarantine solely because of such employee’s absence from the workplace during the period of quarantine; (c) the employee must provide the employer with a comprehensive Sickness Note and Declaration upon entry into quarantine regarding the obligation to stay under quarantine and its duration; (d) these obligations and directives apply not only to the employee but also to those who provide services to and volunteer with the employer.

What about employees’ absence because of quarantine?

The law in relation to quarantine is identical to the law in relation to any sick leave. The comprehensive Sickness Note and Declaration that the employee shall present to the employer will be used as a sickness note for the period of quarantine. Accordingly, the employee will be paid sick leave duly and accordingly to the employee’s sick leave quota (no payment for the first day of sick leave, payment of 50% of the employee’s salary for the second and third days in quarantine, and full payment of the employee’s salary from the fourth day of quarantine and any day required thereafter).

What about employees who do not have accumulated sick days?

We recommend adhering to the company’s policy as it is in this regard. An employee can also be offered a deduction from the vacation days quota or alternatively consider other solutions such as work from home during the quarantine period, as long as the type and nature of work permits it and there is suitable infrastructure.

Regarding work from home, we note that for those of our clientele who already have a work from home policy that relates, inter alia, to the means of remuneration and the degree of recognition of working hours, and in particular in relation to overtime hours, we recommend examining the compatibility of the current period of preparedness and raised awareness to such policy. This is also relevant for employers who have not yet applied a home-based work policy who should also abide by current period’s instructions.

Extending the Limitations on Professional Conferences – Ministry of Health guidelines of March 4, 2020

  1. Employees of the public health system are forbidden from leaving Israel at this time;
  2. Crowds of more than 2,000 people are prohibited;
  3. International conferences are not to be held or attended in Israel;
  4. Employees who returned from abroad cannot attend any assemblies of more than 100 people; and
  5. Employees who attended international conferences must be in quarantine for 14 days.

As far as any other questions arise in relation to an employer’s abilities and obligations to impose restrictions on the employees for concern of the virus’ spread, it seems that currently there are no definitive answers, so that each case would have to be examined on its merits.

However, as far as employers are able to impose restrictions on professional meetings with those who returned from any of the destinations that require quarantine or attending international conferences, it appears that limiting the employee from such meetings or conferences is legitimate and it might even rise to be the employer’s responsibility and duty of care towards its employees during their work.

The current situation is the first time that our country faces a public-medical emergency. Therefore, our recommendation at this time is for workplaces and employers to prepare as much as possible by having a comprehensive workforce management strategy. In the meantime, we recommend that, among other things, employers will make it possible for employees to work from their place of residence and ensure suitable infrastructure, provided that the employees’ health allows it.

We will be happy to answer any additional questions you may have.

Eti Avnery, Adv.

Head of the Labor Law department