Legal Updates

Non-recording of a lien in the Companies Registrar will render it invalid vis-à-vis third parties

August 22, 2017

Two companies executed a partnership agreement for the joint acquisition and management of a commercial real estate property and each undertook in the partnership agreement not to transfer its rights to another without the consent of the partner. One of the companies had an investment by an investor to finance its share and pledged the common property to the investor. The lien was recorded at the Land Registry but not at the Companies Registrar.

The Court held that because the company did not record the lien in the Registrar of Companies within the 21 days required by law, the lien does not oblige third parties, including the partner in the joint venture.  Even if the lien was recorded with the Land Registry or the Registrar of Pledges, this does not satisfy the provisions of the Companies Law. In addition, the investor was aware of the partnership agreement that prohibited the transfer of rights and therefore should also have known about the prohibition to pledge assets in its favor.