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Common Business Entities in Iraq

Post By: Mustafa Muayad - Founder & Managing Partner mustafa.muayad@muayadandassociates.com Print Post

Common Business Entities in Iraq

Are you looking to penetrate a new market? Are you in search of amazing business growth opportunities? Iraq is the place to start your operations. Emerging from years of war, Iraq has indeed become the new Middle East—and that is not an overstatement.

The country now presents tons of business growth opportunities and investments. Besides this, Iraq is one of the richest countries in oil and gas. Its economic growth makes Iraq one of the best places to create a business entity and start operations.

However, as an experienced law firm in Iraq, we advise you to develop a strong understanding of different and common business entities in Iraq. This information is needed to launch operations smoothly in conformance to Iraqi regulations.

Therefore, to begin with, there are several options that you can consider when investing and establishing a legal presence in Iraq. These include:

Branch of a Foreign Company

The governmental entity responsible for regulating and establishing foreign branches and granting the certificates of regulation is the Ministry of Trade/Registrar of Companies Department. A new law, Regulation No. 2 of 2017 was issued to regulate the registration of foreign companies in Iraq.

According to the law:

If the foreign companies that intend to set up a branch in Iraq have established their operations for at least two years in the country of their origin, they will be permitted to conduct business in Iraq if they obtain any of the following:

  • A governmental contract or a sub-contract with an entity that is contracted with the Iraqi government; or a contract with either a state or mixed sector companies.
  • Have investor license as per the investment laws applicable
  • Have a business license that is granted from an authorized Iraqi governmental entity, or
  • Is conducting business in a private sector if the project or contract value is not less than 1 million US dollars

Please note that you shall not be granted a license to carry out commercial activities in Iraq, even if you have a certificate of registration. At times, the sector-related license requirement is pronounced by the RoC after the registration certificate issuance. It is subject to the activities that are listed in the AoA (Article of Association) if the RoC declares the license acquisition necessary.

Nonetheless, if a foreign company wants to launch an LLC in Iraq, it must have an Iraqi partner with 51 percent of the shares in the company as per the new and amended Iraqi Law 17 of 2019.

New Iraqi Business Entity

Another common business entity that you can opt for is the new Iraqi entity. This is feasible if you want to incorporate a new company in Iraq with a citizen of Iraq or 100 percent ownership. Please note that 100 percent ownership is allowed if the shareholder is juristic or Iraqi.

To incorporate a new business entity in Iraq, you can choose one of the following types:

Joint-Stock Company

In a joint-stock company, you can have a minimum number of five owners. All owners are responsible for the company’s debt to the extent of the nominal value of their shares.

Limited Liability Company

Also known as the LLC, this is created by a juridical person. Owners of an LLC are responsible for the company’s debt to the extent of the nominal value of their shares. Please note that there is a minimum capital requirement for forming an LLC, and there are certain exceptions for businesses in the construction and aviation industries.

Besides this, an LLC cannot have a board of directors. It shall be managed by the Manager, who is also liable for the management as per the authorities granted to him by the general assembly.

Some essential characteristics of establishing a limited liability company and its formation under the Companies Law are that:

  • An LLC must not have more than 25 shareholders
  • The Memorandum of Association (MoA) of an LLC is its governing document and should contain the following:
  • Name and form of the company and its objectives
  • Head office address in Iraq
  • Name, occupation, nationality of the founder(s), and address
  • Share capital
  • A foreign investor who wishes to set up a company in Federal Iraq should complete an application and then submit it to the Companies’ Registrar in Baghdad for processing with all the necessary documents.

Joint Liability Company

This is another form of business entity you can create in Iraq. As the name suggests, it is created jointly with a minimum of two shareholders. In a joint liability company, owners can jointly assume unlimited and personal liability.

Sole Owner Enterprise

In contrast to a Joint Liability Company, this type of entity can be created by one business owner. You don’t need to partner with anybody else. Since one person owns the company, the business owner assumes personal and unlimited liability.

A Simple Company

When launching operations in Iraq, this is yet another type of company you will come across. A Simple Company is just like a partnership. However, if you opt for this type of business entity in Iraq, you will need at least two partners. Also, you can’t have more than five business partners in a Simple Company who contribute shares to your business capital. Moreover, they shall only carry liability to the extent of their company shares.

Another interesting fact about this type of business entity is that you don’t have to be registered with the Registrar of Companies Department in Iraq. However, you only need a notarised establishment contract. All the partners of the company should sign this contract. Furthermore, make sure that the establishment’s contract copy should be placed with the registrar of the companies.

For more information about the common business entities in Iraq discussed above or for legal guidance and step-by-step assistance, contact us. At Muayad & Associates, we have a team of experienced and dedicated lawyers who can provide you with quality guidance much needed to establish your operations in Iraq smoothly and without any hassle or legal complexity. Contact us today to schedule a free consultation.