The Israeli law allows a group to join up in a number of different frameworks: the best known manner is a limited company. In the oil and gas business it is common to link up as a limited partnership instead and thus they are traded as participation units and not as shares. Nevertheless, the stock exchange practice is the same in both cases. Both papers have a price and the manner of trading them is similar. From the practical point of view, participation units in this field are often called oil and gas shares.
A limited partnership is a legal structure that includes the entrepreneur-managing partner known as the general partner and the public that invests in the company known as the limited partners. Once they are set up and have a petroleum right, it is necessary for them to raise the funds to carry out the drilling work which is done through a rights issue on the stock exchange to raise the funds with the public.
The general partner needs to buy 25% of the issue or at least 12 million shekels worth, the lesser of the two.

A limited partnership have to pay out/share out profits with their shareholders. This is not the case for instance with an Ltd.

The partnership structure includes the general partner who manages the partnership and a limited partner who issues the participation units. The general partner is entitled to a management fee from the partnership. The limited partner is regarded as the entity that brings in funds to the partnership when the connections is made – either money or an asset that has a certain value – so that he has no greater obligation than the sum that he has invested into the partnership. The partnership’s proceedings are easier from the legal point of view than that of a “regular” company, but its disadvantage is that its members are liable for the debts of the whole partnership up until the ceiling of the sum that was invested. This, contrary to a company where there is a distinction between the company and the holders of control within it and each entity is defined as a separate legal entity.

The different company structures:

The partnership agreement – This agreement usually relates to the objectives of the limited partnership, its authority and the special projects that he can only deal with and invest in; the expenses of the limited partnership, the functions and responsibilities of the general partner and the partners share in the partnership equity; payments of the partnership to the general partner and to its persons of interest; the limited responsibility of the limited partnership; competition in the partnership and limitation of deals with the general partners and persons of interest in it; the period of the limited partnership; changes in the partnership agreement; the departure of the general partner from his functions; the dissolution of the partnership; the division of profits by the partnership and other.

The partnership was established and operates based on two agreements. The establishment of the partnership is done based on the partnership agreement between two partners: the general partner and the limited partner.

Contrary to public companies, in these types of partnerships the ability of investors from amongst the pubic to present their views and to influence management decisions of the general partner, is most limited and practically these are limited to a very few issues that are brought to the vote at a meeting of owners of participation units, such as changes in the partnership agreement, increasing the partnership equity by issuing more units, merging of units, changes in the objectives of the partnership, ending the partnership and in some of the cases, depending on the partnership agreement, approval of the entering into deals with parties of interest.

Because of the structure of these partnerships, contrary to all other companies Ltd. it is not possible for anyone to gain control over these companies by purchasing a large block of shares, since regardless of how few shares the general partner holds, he has full control over the partnership.

The general partner – usually a private entity (company Ltd) owned by an entrepreneur. The general partner holds a minority of rights in the equity of the partnership, deals with the management of the partnership, and he is the entity that is putting forth the partnership’s prospectus. He is the entity authorized to conduct negotiations and to sign in the name of the partnership on all the agreements required to manage the business at hand. The general partner needs to buy 25% of the issue or at least 12 million shekels worth, the lesser of the two. He is entitled to a management fee which is often a fix fee and a percentage of expenses.
The general partner is in turn controlled by the entrepreneur who sets the ball rolling. These are the people responsible for leading to the partnership’s incorporation, to bring the professional people into the group and bring content to the partnership by buying assets (usually oil and gas rights) and are the entities that organize matters for the IPO to the public in order to raise the necessary funds to pay for the partnership’s operations.

The limited partner is not involved in the partnerships commitments/debts and the risk that he takes is limited to the investment that he has made in the partnership equity, and it is the limited partner that holds the majority of the participation units. In accordance with the rate of holdings in the partnership equity, each partner’s share in the rights to profits of the partnership is determined (if there such be any profits). In accordance with the Partnership Ordinance (New Version) 1975 the limited partner will not participate in the management of the partnership’s business and he has no powers to enforce anything on the partnership.
The limited partners is also called trustee because he holds participation units in the rights of the limited partnership in trust for the public.