The Companies Law offers a thorough framework for organizations and people, both Iraqi and foreign, to legally perform business activities in Iraq. The applicable regulations mandate that all persons and organizations conducting business in this country must be duly registered there, just like in other jurisdictions. All economic endeavors are required by the Companies Law to take the form of a business. A variety of incorporation options are offered by the Companies Law for starting a firm here. The choices include:
- A sole proprietorship.
- A joint stock.
- Joint liability.
- A simple business.
However, the most popular strategies used by foreign investors who are not Iraqis and who conduct business over here are:
- Limited liability business.
- Representative trade office (RTO).
- Foreign branch office (LLC).
Any individual who conducts business here without first registering with and obtaining a license from the Registrar of Companies at the Ministry of Trade (Registrar of Companies) is in violation of Iraqi law and is subject to a fine, the amount of which depends on how serious the violation was. Any person conducting business under the name of a branch of a foreign firm or other economic entity without acquiring the necessary authorization is subject to a similar penalty. If the company’s Law breach is not fixed, the authorities may take additional action.
Trade representative office
The simplest approach to registering a business entity in Iraq is through an RTO. An RTO is only allowed to conduct company “growth operations” in order to find employment in Iraq. An RTO must change its status to one of the other authorized commercial organizations in Iraq once it either wins a contract with the Iraqi government on behalf of its overseas parent firm or starts conducting business there. The Registrar of Companies, who checks all applications submitted by foreign businesses for completeness, must provide permission before an RTO may be created. There is a charge. After submitting an application, one of three things could happen:
A request might be regarded to be unfinished
Any fee that was paid in this case will be given back to the applicant. The application may be resubmitted after being finished and an explanation of why it is incomplete will be provided.
A completed application is approved
In this situation, the applicant will receive a signed checklist from the Registrar of Companies certifying receipt of all necessary paperwork. The Registrar of Companies will grant the applicant a registration license after approval. This is permanently and individually identified by a number.
Foreign branch office
According to the rules, a contract between the foreign corporation and the Iraqi government is necessary before it can open a branch there (or be a subcontractor of a company that has a contract with the government). Moreover, in order for foreign businesses to register in Iraq, the regulations stipulate that such a contract must be of a minimum term and value.
Company limited liability
According to Iraqi legislation, an LLC must have a minimum of two shareholders and a maximum of 25 in order to be founded, and a business is generally defined as a contract enforceable between two or more people. The company’s law does, however, make an exception to the general rule and allows the formation of an LLC by a single person, whether natural or judicial, foreign or local. Each LLC shareholder’s liability is capped at the amount of their capital contribution to the business, as is the case in the majority of common law jurisdictions. Although each shareholder should have shares proportionate to their capital contribution to the company, Iraqi law does not mandate that shares be distributed evenly among various shareholders.
An LLC must have a Memorandum of Association (MoA) between its shareholders as its founding document. One founder of an LLC is required by the Companies Law to create a statement that is deemed to be and is subject to, the company’s law.
The following elements must be included in the MoA in accordance with the Companies Law:
- The prospective firm’s name in this example, a limited liability company, should be included.
- The planned business’s headquarters must be in Iraq.
- The goal of the proposed company and the types of businesses it engages in.
- The capital of the proposed corporation comprises the number of shares and their respective values.
- The founders’ names, nationalities, occupations, and residences at which they are permanently located.
An applicant must complete a certain registration process and meet certain requirements in order to establish an LLC in Iraq.
- Obtain the Baghdad Chamber of Commerce’s blessing for the LLC’s suggested name.
- Deposit the proposed LLC’s share capital in an Iraqi bank.
- Obtain no objection letters for the Registrar of Companies from the tax authority.
- Send the completed LLC application on the form provided by the Registrar of Companies.
According to the Companies Law, if the Registrar of Companies rejects the application, it must indicate in writing which legal restrictions were broken as well as the circumstances surrounding each infraction. Within 30 days of receiving notice of the refusal, the applicant has the right to appeal the decision before the minister of trade. According to the Companies Law, the minister of trade must evaluate the appeal within 30 days of its submission.
