Collateral to customers
First a few words about the importance of a trustee lawyer…
A lawyer is subject to two main laws: the Trust Law and the Rules of Ethics. If he violates the trust, it may reach a criminal level and this includes, among other things, a violation for which the trustee can be sued himself. In addition, he exposes himself to the revocation of his license to practice law.
Every attorney and especially a trustee attorney like ours, must have a professional liability insurance policy, the very fact that we have this policy, indicates that there is another body that oversees the trustee’s activities.
In addition, the Anti-Money Laundering and Terrorist Financing Law applies to trust services and funds. Therefore, every transaction performed in the account is supervised by the bank. That means, there are 2 external bodies that oversee the activities of the trustee and this of course minimizes the chances of performing actions contrary to the provisions of the trust.
The trust account is checked by the fund’s accountant who receives a viewing certificate for the bank account and thus the fund has additional control over the account’s activity.
Legal structure and the money route
The investment money of the investors from capital / debt goes to the trust account of the fund managed and supervised by the trustee and is held there in accordance with the provisions of the trust.
1.The funds in the trust are transferred directly to the purchase of the properties by the property companies and against registration of ownership with the Registrar of Real Estate and the Registrar of Local Companies.
2.The balance of the funds is transferred for the benefit of construction / renovations according to legal / engineering milestones backed by receipts and quotations.
3.Approval of transfer of funds only subject to the signature of the project manager and with the approval of 2 directors in the property company, one on behalf of SMI and the other on behalf of the local partner. The trustee is the last approver of any transfer of funds.
4.A tax model in coordination with the agreement between Israel and the country in which the investment is made – a capital gains tax of 25%, which will be deducted by the fund, respectively.
Legal protection mechanisms embedded into the fund
- Joint project management company with a local partner – creates an identity of interests between the local partner and SMI and increases control over the partner’s activity and its bank accounts (SMI has direct access and signature rights in the management company’s bank account).
- A dedicated trust account for the fund under the supervision of a law firm that specializes in the field.
- A bank account designated for each project in which the fund invests. SMI and the trustee have signature rights in each bank account and any withdrawal of money for any reason, requires 3 signatures: SMI director, representative on behalf of the local and trustee partner.
- Payments from the trust account and / or project accounts are made according to legal and engineering milestones that can be visited and received for each payment.
- The fund’s contract with the property companies contains control mechanisms for decision making and taking over the project from the local partner in extreme cases – to a power of attorney fund and a local legal team at Stand By for the benefit of the matter.
- Association of investors in the fund through an Israeli limited partnership and registration of the rights of investors in the Registrar of Partnerships in Israel – a direct property right in the fund and derived up to the level of the conferences themselves
- The fund owns 90% -95% of the ownership rights in each of the assets in the projects in which it invests.
Control and monitoring protection mechanisms
- Infrastructure of a local team consisting of lawyers, accountants and project managers.
- Proper review of local partners before contacting them.
- Building an optimal investment model in accordance with local law followed by strengthening Israeli legal mechanisms.
- Synchronization of the model in coordination with the tax treaty between the countries in order to reduce the tax as much as possible for investors.
- Working with more than one local partner in the various projects – creates a replacement for a problematic partner and strengthens the fund’s negotiation capabilities and maximizes its interests.
- Building a unique business plan for each venture by the local partner and creating a built-in Fall Back plan for each project in case of crises or other unplanned events.
- An investment committee composed of the company’s founders, a representative of the attorney general and a senior analyst – the committee selects the best projects that have undergone very strict screening.
Some regulation – do’s and don’ts
- An investment in a fund is an investment in securities and therefore, the Securities Law, 1968 applies to the investment.
- The company and the fund operate in accordance with the legal opinion of the Barnea firm and Adv. Zvi Gabay, an expert in the field of securities and formerly responsible for enforcement in the PA (Professional Association).
- The company and the trustee are subject to the Anti-Money Laundering Law, 2000 and every investor is required to make a “Know the Customer” (KYC) in accordance with the requirements of the law.
- In accordance with the Securities Law, there are restrictions on making a public offering of securities. Publishing and providing specific information about the launch via the Internet, the written press, telephone calls or in any other way may be considered as a public offer
