Iraqi Companies’ Law Amendment
Iraqi Council of Representatives, in its Session No. 28 held on Thursday 27th of June, 2019, passed the law of amending Companies’ Law No. 21 of 1997.
The amendments came at a time when Iraq is undergoing a stage of attempts to open up to the global market, bringing in foreign investments and capitals. We can say that one of the most significant amendments to the existing Companies Law is the introduction of a new type of companies that was not there in the work system of Iraqi companies, namely, the holding companies. This is an attempt by the Iraqi legislators to keep up with the evolving laws in the world and neighboring countries.
The holding company is a contract that is not largely different from the contracts of other forms of companies, but the former is legally given control over other companies and their boards of directors. For example, the Company Law of Jordan companies defines the Holding Company in Article 202 as being “a public joint-stock company that controls the financial and management of other company or companies called affiliates or subsidiaries.”
Not very far from this definition, the current amendment to the Iraqi Companies Law defines the Holding Company as “a joint-stock company, or a limited company, or an individual enterprise that controls a limited or joint-stock company or companies that are called affiliates or subsidiaries in one of two cases: the first case, when the company owns more than half of the company’s capital, in addition to controlling its board of directors; and the second is that when it has control over its board of directors. ”
The introduction of this type of companies within the legal system of companies in Iraq is not only a matter of finding a new type of companies therein. It can also be a very important factor in the process of the economic and financial renaissance of Iraq, simply because the new amendment gives the Council of Ministers the power to authorize the ministries and entities not associated with a ministry to establish holding companies, or contribute to the establishment of the companies in accordance with the provisions of the law. Also, enables the Council of Ministers to approve the conversion of the existing State-owned companies belonging to the ministries and to entities not associated with a ministry into holding companies. This latter article of the amendment law is expected to make a qualitative transition in the Iraqi economy since the conversion of a number of companies affiliated to the ministries to holding companies, in addition to giving the Iraqi natural person or legal person the right to acquire membership as a founder or shareholder or partner in the said companies as provided in this law, as well as giving the foreign natural or legal person the right of membership of joint-stock and limited companies, provided that the contribution percentage of the Iraqi member is no less than 25%. This means that the foreign capital is expected to enter Iraq and that large investments will be attracted, especially in the public sectors of the State. These will be transformed into Holding Companies and this will consequently be reflected in the Iraqi economic situation. Also, this represents a great opportunity for foreign investors in Iraq, especially as Iraq is heading to a process of reconstruction that covers the majority of its infrastructure and superstructure.
One of the significant amendments included in the current amendment of the Companies Law is the acceptance of electronic transactions and the adoption of express mail for all correspondence, communications, data, and procedural matters in all transactions related to the Registrar of Companies as stipulated in the amendment.
It is also worth noting that this amendment has given priority to Iraqi companies to obtain government contracts, and definitely, those companies have contributions by foreign companies, which will give a big incentive for the foreign shareholder to enter the Iraqi companies, which will be established in accordance with the rules of the latest amendment.
We can not fail to mention that the amendment law has allocated 10% of the revenues of the Company Registration Directorate to develop its own infrastructure.
Article written by :
Mustafa Muayad
mustafa.muayad@muayadandassociates.com
Founder & Managing Partner
Muayad & Associates