Israeli Market Scrutinizes BVI Companies After Governance Failures in Simad and Kohan Properties

In recent years, Israeli capital markets appeared to close off to BVI companies, mostly American firms incorporated in the British Virgin Islands, that raise debt on the Tel Aviv Stock Exchange backed by real estate or other assets transferred by controlling shareholders or parent companies. This followed collapses and corporate governance failures in several such firms at the end of the previous decade. However, over the past three years, BVI bond issuances have surged, reaching a record 9.8 billion shekels in 2025, a 16% increase from 2024. The momentum continued into 2026, with 5.5 billion shekels raised in the first half, up 14% year-on-year.

Recent revelations involving two BVI companies, Simad Holdings and Kohan Properties, have cast doubt on this model and may halt the debt issuance wave. Simad, which operates summer camps in the U.S., raised 620 million shekels in December but entered bankruptcy proceedings after its controlling shareholders withdrew about one-sixth of the proceeds. Kohan Properties, owner of U.S. shopping centers and office buildings, raised 412 million shekels in March. It was reported that its controlling shareholder used at least 30 million shekels from the issuance to repay loans on assets not owned by the company. Kohan claims the funds were returned and has deposited additional sums pending further investigation. The Israel Securities Authority also forced Kohan to disclose previously unreported loans and transfers.

Institutional investors such as Meor Investment House and Meitav hold significant portions of these bonds, with Meor alone holding about 35% of Kohan’s issuance. Market participants acknowledge that while many BVI companies have operated responsibly, the recent incidents highlight the need for direct investor oversight. Investors now demand mechanisms such as compliance officers, Israeli directors with signing authority, or trustees to monitor controlling shareholders’ actions.

Experts note that Simad’s operational nature and lack of tangible asset backing increased its risk, whereas Kohan’s secured real estate assets provided more protection. The Israel Securities Authority’s proactive role in uncovering Kohan’s issues early is seen as a positive development. Going forward, the market is expected to require tighter governance controls for BVI companies seeking to raise capital in Israel, reflecting a shift from reliance on trust alone to enforced oversight.

Meor Investment House emphasized that thorough analysis cannot predict alleged fraud, which it condemns, and reaffirmed the importance of investor trust. Kohan’s bonds remain secured by income-generating assets and equity, providing some investor protection despite governance concerns.