"Soft Landing in Israel" services not only save foreign entities looking to operate in Israel (whether as a branch or a subsidiary) a major headache, but they are often not merely a convenience, but a necessity. In the global era, many enterprises manage their Israeli branches via "remote control" - they appoint local managers, grant them authority, and settle for periodic reports. However, business and legal reality teaches us that this model - which does not align with proper corporate governance rules - carries significant risks that may even lead to the loss of the company, if not just create massive losses. The need for "Boots on the Ground" - an independent party loyal to the owners or management outside Israel, yet physically present in Israel - is not just a managerial need, but vital for risk minimization.
The Agency Problem is a fundamental concept in economics, management, and law, describing the inherent conflict of interest that arises when one party (the "Principal") hires the services of another (the "Agent") to manage on their behalf. Naturally, the agent has their own interests, which sometimes do not overlap (and may even contradict) the principal's. As the agent is "in the field" and is managing the affairs, there are information asymmetries and complete supervision is difficult. When the agent is in Israel and the principal outside thereof, and especially when the principal does not speak fluent Hebrew (and often translation alone fails to convey the subtext or local practices), there is great importance to having a party in Israel who represents the foreign entity and acts as its "eyes on the field and boots on the ground". Usually, the mere existence of such compels the agent to act with transparency even without any further action.
While the Israeli Companies Law imposes a duty of care and a duty of loyalty on directors and officers, the retrospective ability to sue directors and officers for damages caused is an expensive and inefficient solution, to say the least, when damage can be prevented in the first place by having eyes and feet on the ground. No less importantly, when management abroad blindly relies on local management without an independent control mechanism, it risks breaching its own duty of care and may not enjoy the defenses of the Business Judgment Rule.
How can one increase supervision? "Soft Landing in Israel" services certainly include the appointment of an Israeli director (who is not part of the local management) on behalf of the management abroad, and they certainly include placing the company's registered address with the service provider (to prevent official correspondence from "disappearing" due to negligence or intentional concealment by a local employee). However, it is also highly recommended to modify signatory rights in the company to ensure that anything outside the ordinary course of business also requires the signature of the appointed representative.
In conclusion, and as the writers of this article is supplying "soft landing services" in Israel to numerous non-Israeli parent companies or shareholders, appointing "boots on the ground and eyes on the field" is not an expression of distrust in local managers, but a necessary corporate governance tool. Therefore, it is important to employ not only a serious representative but also one who is part of a firm with experience in the field. Such a service provider will allow not only for risk reduction but also the enjoyment of many other advantages, such as smoother operations in Israel and even significant financial savings.