local and foreign companies are regulated under the amended company law no 21 of 1997 as amended in 2004, the objective of the law is:local and foreign companies are regulated under the amended company law no 21 of 1997 as amended in 2004, the objective of the law is:
- Organize companies.
- Protect creditors from fraud.
- Protect shareholders from conflict of interest and related abuses by company officials, majority of owners and others with practical control over the affairs of the company; and-
Promote the provision of full information to owners in connection with a decision affecting their investment and their company.
FORMS OF COMPANIES:
There are five different types of company structures
Joint stock companies - mixed or private
Joint stock companies must be established by at least five natural or legal persons. They offer shares through public subscription. The shareholders are responsible for company debts to the extent of the value of their respective shares.
Iraqi law requires insurance, reinsurance, financial investment, banks, and money transfer firms to be joint stock companies (Article 10 of the Companies Law No. 21 of 1997as amended). Founding shareholders must post an incorporation deposit (Article 28 of the Companies Law No. 21 of1997) in a bank authorized to operate in Iraq.
Financial investment companies operate as financial intermediaries investing in financial securities. They are governed by the Companies Law as any other joint stock company. Their operations, however, are supervised by the Central Bank of Iraq in accordance with the Iraqi Central Bank Law No. 56 of 2003 and Financial Investment Companies Regulations No. 6 of 2011.
Sole Proprietorships
Sole proprietorships may be established by a single natural person. Insole proprietorships, the owner assumes personal, unlimited liability. This company is called a "sole owner enterprise". Joint liability companies. Joint liability companies are established by a number of persons ranging between two and twenty-five natural or legal. The liability of the owners is unlimited and they participate in proportion to their respective shares in the company.
Simple companies
Simple companies are established by a number of persons• ranging between two and five, each of whom contributes capital to the company in the form of cash or labor The Companies Law requires simple companies to have notarized incorporation papers. Simple company’s partners must deposit a copy of the incorporation charter, delineating the partners and their quotas with the Iraqi Office of Company Registration (OCR) at the Ministry of Trade (MOT).
Limited liability companies - mixed or private
Limited liability companies may be formed by no less than two and no more than twenty-five natural or legal persons. Limited liability companies may also be established by a single natural person. Founders are responsible for company debts to the extent of the nominal value of their respective shares. A mixed company may be formed by agreement between one or more legal persons from the public sector and one or more from other sectors, i.e., private, mixed, and/or cooperative, provided that public sector shares represent no less than 25 percent of the total company capital. If the percentage of state-owned shares falls below 25 percent, the company is considered a private company. The vast majority of registered enterprises in Iraq are limited companies.
COMPANY INCORPORATION AND FOUNDATION
Foreign entities may incorporate Iraqi companies and trade representation offices/branches, and operate in Iraq under the Companies Law 21 of 1997 as amended, MoT Instruction No.196 of 2004 regarding the registration of Iraqi companies, and Regulations No. 5 of 1989 for the registration of branches and trade representative offices of foreign companies. On the other hand, foreigners are not allowed to engage in retail sales activities before fulfilling the following requirements:
Depositing a US $100,000 surety in a non-interest-bearing account with an authorized bank in Iraq 30 days prior to registration
Obtaining a certificate of authorization from the MOT
The foreign retailer may apply to the OCR who in turn provides him with a letter to the relevant bank approving the reimbursement of the surety deposit. However, this can only be done after the retail activity in question has ceased.
Company Registration:
The first step for any foreign company to start the commercial business is to be registered under the Iraq law and regulation. The company registrar a circuit under the Ministry of Trade and is the competent authority to register any foreign company. Various laws and regulations such as the amended company law no 21 of 1997, Registration Agency Law no. 4 of 1999, General company law no.22 of 1997, Commercial Agency regulating law no.51 of 2000.
In order to register a Branch The following requirements must be Fulfilled:
1- A copy of the memorandum of incorporation and articles of association of the mother company or corporation or any equivalent document provided it should include names of the board of directors and the individual authorized to sign on behalf of it.
2- A copy of a valid registration certificate of the company or the corporation issued from the country of origin.
3- A copy of the latest final accounts of the company or the corporation together with the board of directors report attached with these accounts. B-A cash statement for the company or a foreign economic enterprise in the existence of a legal preventative to present its financial as being newly established.
4- A letter from the mother company to bear the financial and legal responsibility of its branch.
5- A copy of the power of attorney of the branch or office manager in Iraq who actually resides therein issued from the company or corporation management with an indication of his powers.
6- The authorization of the representative for filing with the registrar of companies.
7- A copy of the form of the license request.
8- A confirmation letter from the government departments or contractual sources clarifying the contract nature or the rendered services together with the commencement and expiry date of the contract and the maintenance period ،if any ،concerning the companies which are subject to get a branch license only.
NOTES:
- The above documents should be certified by the competent authorities (like the Notary Public + Ministry of Foreign Affairs + Iraqi Embassy + Iraqi Ministry of Foreign Affairs) in the country of origin and should be translated to the Arabic language if these documents are in foreign language.
- The colored copy of the branch or office manager passport ( for foreigners only) and identity card and ration card for Iraqis.
- Colored copy Identity card and ration card for the representative of filing with the Registrar of Companies.
- The branch or office manager and the representative of filing with Registrar of Companies must reside in Iraq.
Clarification
FIRST: the different between a branch and representation office of a foreign company as defined in article (1/ first – second ) of the regulation is :
1-What meant by a company branch or economic enterprises whatever allowed under this regulation of companies branches or foreign enterprises whose activities were always in Iraq under a treaty or a contract with the state or contracting for implementation of certain project with the state offices. 2- What meant by representation offices or economic enterprises whatever allowed under this regulation aimed at market study and the possibility of work or production or identification for the products and services or contact facilities its positions and prohibited from practicing any trading activities of agents and broker trader.
SECOND: the required period to finish the registration procedures:- - The approval shall be obtained to register a branch for a foreign company in compliance with the provisions of article (3-second) of above regulation. The registration procedures take (3) days in case of submitting all documents required for regulation and relating instructions - The approval of the minister shall be obtained to register a representations office in conformity with the provisions of article (3-third) of branch of representative offices of foreign companies and economic corporations regulation No.(5) of 1989.
New Company Registration Regulations:
The Council of Ministers in 2017 issued a new law that amended the system of registering branches in Iraq. The law no.2 of 2017 has regulated that a foreign company can directly be registered as a branch in Iraq replacing regulation law no. 5 of 1989.
This system allows foreign companies to open their branches in Iraq and conduct commercial activities after presenting the registration form, Memorandum of Association, and all documents that authorize a director to be in charge of managing the Iraqi branch.
The law also stipulates that the registrar shall issue the registration permit within seven business days from the date of publication of the authorized person to register the branch in Iraq. The branch shall submit official documents showing the full address of the branch headquarters in addition to an opening of a current account in one of the licensed banks in Iraq.The branch is also committed to stipulate full name as stated exactly in the certificate of registration clearly in Arabic language and must be printed on all its papers and documents in addition to the address of its office in Iraq, with the possibility of using a foreign language as an addendum. The Branch must maintain regular accounting records in the Arabic language for all its activities in Iraq according to the accounting system and laws related to.
In view of the importance of this law to foreign companies operating in Iraq, the law has mentioned the following articles;In view of the importance of this law to foreign companies operating in Iraq, the law has mentioned the following articles:
Article 1:
For the purposes of this Regulation, the following terms shall have the following meanings:
- Minister: Minister of Commerce
- Registrar: Registrar of Companies
- Foreign companies: The company established outside Iraq under a foreign law.
- Registration License: The document issued by the Registrar of Companies announcing the registration of the branch of a foreign company in Iraq.
- Branch: The legal entity representing the foreign company in Iraq.
- The POA authorizing the person assigned to submit the request to open the branch in Iraq.
- Final accounts of the foreign company last fiscal year.
- The undertaking certificate prepared by the Registrar.
- Any other document requested by the Registrar relating to the company’s activity
Article 2:
For each foreign company willing to conduct business in Iraq and has been established for the period of two years can open branches in Iraq after the submission of the following documents to the Registrar translating the related documents to the Arabic language, and ratifying them dully by the competent authorities in the country of incorporation.
- First: Special Application form to request a license in Iraq prepared by the Registrar.
- Second: The Memorandum of Association and Articles of Association of the foreign company or what replaces them.
- Third: A valid Certificate of registration (establishment) of the foreign company or whatever replaces it.
- Fourth: A list of the members of the board of directors of the foreign company and the nationality of each of them, and the names of the persons authorized to sign them.
- Fifth: The document authorizing the director in charge to manage the branch in Iraq and actually residing in that branch.
- Sixth: The document authorizing the person assigned to submit the request to open the branch in Iraq.
- Seventh: Final accounts of the last foreign company fiscal year.
- Eighth: The undertaking certificate prepared by the Registrar.
- Ninth: Any other document requested by the Registrar relating to the work of the Company.
Article 3:
- First: The Registrar shall issue a decision approving or rejecting the request of granting the foreign company a registration license of a registered branch in Iraq within 30 working days from the date of submission and in accordance with the requirements stipulated in Article 2 of these regulations. In case of rejection, the decision shall be justified.
- Second: The foreign company has the right to object to the rejection decision according to the law.
- Third: The authorized registration agent will publish the decision of approval of a branch within 15 working days from the date of the decision issuance for a one time in a local newspaper after paying fees as prescribed by law or otherwise the decision is null.
- Fourth: The Registrar shall publish the decision of approval in his internal bulletin.
- Fifth: The Registrar shall issue the registration license within seven working days from the date of the last publication.
Article 4:
The license for registration is not a license to practice the activity.
Article 5:
- First: The branch undertakes to submit the following to the registrar:- An official document showing the branch headquarters full address in Iraq certified by the competent authority.- supporting document of opening an account in one of the licensed banks in Iraq.- License to practice activity issued by the competent sector if required
- Second: The licensed registered branch shall not be entitled to engage in a commercial activity without completing the submission of the documents referred to (1) of this article.
- Third: The branch is committed to:
- Stipulating its full name as fixed in the MOA and stipulating the address of its main management center in Iraq in Arabic language and clearly on all papers and documents with the use of foreign language as an addendum.
- Maintain accounting records in the Arabic language for all its activities in Iraq in accordance with the accounting system and related laws.
Article 6:
The branch can carry out a commercial activity in one of the following cases:
- First: Contracting with one of the Iraqi government agencies and companies in the public and mixed sectors.
- Second: obtaining investment licenses according to the valid investment laws in Iraq.
- Third: Obtaining a work permit granted by one of the Iraqi legally authorized authorities.
- Fourth: Working with the private sector in Iraq provided that the amount of the contract or the value of the project is not less than (1000000) million US dollars.
Article 7:
- First: The branch shall be managed by a director or his representative in case of his absence according to a valid the authorization issued by the foreign company and the representative has to be resident in Iraq.
- Second: In case of change of branch manager or his representative, the Registrar of Companies must be notified within 30 working days from the date of the approval of the Iraqi consulate located in the country of the foreign company.
Article 8:
- First: The accounts of the branch and its activities are audited by a licensed auditor in Iraq.
- Second: The Branch shall submit its audited financial accounts and a report of its activity in Iraq to the Registrar during the eight months following the end of the year.
Article 9:
The Registrar may request any information or documents which deems necessary to be submitted in order to facilitate the implementation of the provisions of this Law.
Article 10:
The Registrar may choose one or more inspectors who have the experience and competence to inspect the branch's work in the event that there is such a requirement, and the branch shall provide all the necessary facilities for the inspector to perform his duties.
Article 11:
- First: The Registrar shall cancel the registration license and the branch shall be removed from its records by reasoned decision in one of the following cases:
1. The branch shall not practice any commercial activity in accordance with the provisions of Article 9 of this Law after four years from the date of practicing the last commercial activity.
2. Not to review the Registrar to submit the final accounts and documents required for two consecutive years after the issuance of the registration license without a legitimate excuse.
3. If the presentation of false papers or information is inaccurate and misleading.
4. If it is proved that the branch is engaged in activities contrary to Iraqi legislation or acts that affect the security of the country. - Second: The foreign company may object to the decision of the registrar to cancel the registration and delete the branch before the competent court according to the law.
- Third: The Registrar shall publish the decision of cancellation in his internal bulletin and a daily newspaper and for one time after the decision has obtained the final degree or the expiry of the appeal period.
Article 12:
- First: The foreign company can submit a request to liquidate its branch in Iraq to the registrar within 60 working days from the date of approval of the Iraqi Consulate in the country of origin to the documents supporting the verification of any of the following cases:
1. Declare bankruptcy.
2. Loss of legal entity after merging with another company or companies.
3. It desires to liquidate the branch and end its work in Iraq. - Second: The foreign company appoints one or more liquidators to follow the liquidation procedures.
- Third: The Registrar shall issue the liquidation decision within 15 working days from the date of submitting the liquidation request.
- Fourth: The Registrar shall publish the decision of liquidation in two local newspapers and one-time, and shall approach the relevant Iraqi authorities within seven working days from the date of issue of the liquidation decision.
- Fifth: The branch shall terminate the liquidation operations and submit the final liquidation accounts within two years from the date of the liquidation decision.
- Sixth: The Registrar shall issue the decision to remove the branch from its records within seven working days from the date of the termination of the liquidation proceedings.
- Seventh: In case the liquidation is not completed within the period specified in item (V) of this Article, the Registrar shall cancel the registration license and cancel the branch.
- Eighth: In the event of canceling the registration license and canceling the company's branch, the foreign company shall bear the legal and financial obligations incurred by its branch while in Iraq.
- Ninth: The Registrar shall publish the decision of cancellation in his internal bulletin and shall notify the relevant authorities.
Article 13:
- First: The foreign company is obliged to submit a report to the registrar when it starts any commercial activity in Iraq according to the form of activity prepared for this purpose.Second: The government agencies and the public and mixed sectors are obliged to provide the Registrar with a report on any commercial activity practiced with the branches of foreign companies and in accordance with the form of activity prepared for this purpose.
Article 14:First: It is prohibited for a foreign company to practice any business activity or to open a headquarters in Iraq if it does not grant a license to register in accordance with the provisions of this system. - Second: The branches and offices of foreign companies currently in Iraq registered and unregistered should adjust their legal status to the provisions of this law within one year from the date of its entry into force.
Article 15:
The penalties and the provisions stipulated in the Companies Law No. 16 of 1997 shall apply to branches.
Article 16:
The system of branches and offices of representation of companies and foreign economic institutions No. 5 of 1989 is repealed.
Article 17:
This system shall be implemented from the date of its publication in the Official Gazette.
In practice
The registration process can take a long time. The preparations of the documents require attention and specific wordings are required in most of the documents when drafted. Many clients have faced problems in preparing documents.Part of the long-term registration problem is the long checks that are spent by the Circuit of the Company Registrar and other security checks.Alsaif by experience has managed to overcome such difficulties by following, drafting, preparing, translating and reviewing all documents in order facilitate the registration process. Our teams of lawyers attend on daily basis to the Circuit of the Company Registrar and are updated daily, any requirements or missing documents may be required by the Registrar will be noticed directly by our lawyers and fulfilled.