New Regulations Mandate General Assembly Approval for Cooperative Real Estate Deals
The Registrar of Cooperative Societies launched a strict directive requiring general assembly approval for real estate and major deals in cooperatives, targeting widespread transparency failures and conflicts of interest.
The Registrar of Cooperative Societies has introduced a strict new regulatory framework governing transactions and operational agreements within cooperatives, moshavim, and kibbutzim across the country. The decisive move follows thousands of annual complaints concerning lack of transparency, unauthorized property deals, and severe conflicts of interest among board members.
New Rules for Major Real Estate and Board Transactions
The freshly minted directive establishes a binding definition for a "material transaction," which encompasses any deal involving a cooperative official, any real estate transaction excluding residential rentals, and any high-value commercial agreement. For the first time, cooperatives are legally mandated to secure general assembly approval prior to signing any such contract, with the full agreement draft made accessible to members beforehand.
"While the Mandatory Tenders Law does not apply to cooperative societies, governing boards still owe a duty of transparency to their members. We are now removing any doubt regarding this obligation and putting an order in how transactions are managed," said Adv. Tali Arfi, Registrar of Cooperative Societies at the Ministry of Economy and Industry.
The directive expressly prohibits "transaction splitting," a tactic previously used to bypass approval thresholds. Furthermore, boards must maintain an accessible "transaction file" containing competing price quotes, supplier comparison documents, and protocol records for every commercial undertaking.
Combating Severe Conflicts of Interest
To address rampant governance failures, the regulation imposes strict prohibitions on self-dealing and familial hiring. Board members and their first-degree relatives are strictly barred from serving as legal counsel, internal auditor, bookkeeper, or auditing accountant for the same cooperative. Individuals with personal stakes in a transaction must initiate full disclosure and recuse themselves entirely from discussions and voting procedures.
The registrar's office cited numerous severe historical violations, including the sale of communal assets valued in the millions for a mere quarter-million shekels, covert fuel station construction projects, unauthorized solar ventures that led to costly lawsuits, and multi-million-shekel contractor deals executed without competitive bidding or general assembly oversight.
