The definition of an organ appears in the Companies Law, 5759-1999 (hereinafter: the Companies Law), which defines the organs of a company as follows (section 46):
"The organs of the company are the general meeting, the board of directors, the general manager and anyone who, by law, or by virtue of the bylaws, considers his action in a certain matter to be the company's action in that matter."
Section 46 is interpreted as prescribing two alternative tests to be a person: the hierarchical test and the functional test:
The Hierarchical Test: In accordance with the hierarchical test, the classification of the officer will be determined according to his status in the corporation, where an organizer is a person who is one of the senior officials of the corporation, such as: a member of the general meeting, a member of the board of directors and the general manager. This is a closed list of positions prescribed by law. This test does not leave a wide range of discretion.
The Functional Test: According to the functional test, any person who fulfills a function of the corporation is an organ for the purposes of that function, regardless of his status in the corporation. An "organ" of a corporation is an employee who fulfills a managerial function in a corporation. The classification of the organ is not based solely on the seniority of the officer in the corporation. Even the corporation's documents or other normative source, as well as the nature of the officer's own actions, can lead to his determination as an organ and the attribution of his activities to the corporation. The functional test is subject to different interpretations and leaves broad discretion in the hands of the courts. In the legal literature, opinions are divided as to the proper ratio between the tests.
In the case law, in the case of informants, the guiding judgment regarding the theory of organs, the status of the functional test and the hierarchical test was determined as independent tests for defining an organ, where the functional test is a sufficient condition for classifying an employee as an organ (the Modi'im case, at p. 382 of the judgment of the Honorable Justice A. Barak). See also: Criminal Appeal 3891/04 Arad Investments and Industrial Development in Tax Appeal v. State of Israel, IsrSC 60(1) 294 (2005, hereinafter: the Arad Industries case), paragraph 66 of the judgment of the Honorable Justice E. Rivlin, who held that: "The test for determining the identity of the organ, whose actions can be attributed to the company, It is a functional test, not a hierarchical one."