Iraq is the newest Middle Eastern commercial and investment destination. Iraq is in the spotlight because it is one of the richest countries in terms of oil and gas, as well as having emerged from years of conflict and seen economic progress.
Because the majority of foreign companies want to invest and establish a legal presence in Iraq, there are numerous choices for incorporation that they should examine.
Some may desire to establish a representative office in Iraq or conduct business through a branch; others may wish to form a new Iraq organization or collaborate with locals. Under current Iraqi law, all of these choices are possible, depending on the needs, business, governmental contacts, and actions to be carried out in Iraq.
Representative Office/Branch
The simplest option to establish a presence in Iraq for exploration, marketing, negotiations, and feasibility studies is to open a representative office. Commercial activities or transactions are not permitted at the representative office.
The benefits of establishing a representative office include the ability to establish a legal presence; the ease with which it can be converted into a branch once a governmental contract is obtained; the ability to keep the parent company’s name; and the time it takes to register it, which typically takes about a month to a month and a half from the date of submission of the application to the Registrar of Companies.
All applications are initially registered as representative offices, with no authority to engage in commercial activity until the foreign company has negotiated a contract with the Iraqi or US governments. After obtaining a government contract, a foreign company may petition to change its status from representative office to branch. For the term of the deal, the company will retain its branch status and be permitted to conduct business in Iraq.
As a result, foreign corporations may benefit from the usage of their brand in their Iraqi branch. The parent firms, on the other hand, accept full legal and financial responsibility for their branch or representative office in Iraq.
New Iraqi entity
Another legal option is to form a new company in Iraq, whether with 100% ownership or with the help of an Iraqi national.
Except for a few particular activities, the present Iraqi Companies Law permits foreign nationals, persons, and enterprises to own 100 percent of their companies. A shareholder can be a natural person, a legal entity, an Iraqi, or someone else.
Furthermore, several types of companies can be owned by a single individual, meaning that a foreign company or natural person can possess 100% of an Iraqi company.
The new Iraqi corporation could be classified as explained below
Joint Stock company
A joint-stock firm must have a minimum of five shareholders. Owners are responsible for the debt of the company up to the nominal value of their shares.
Limited-liability company (LLC)
- A single natural or legal person can form an LLC.
- Shareholders are liable for the company’s debt up to the value of their shares.
- With exceptions for some industries such as construction, aviation, and others, the general minimum capital requirement is IQD 1,000,000 (about US$850).
- This firm will not have a board of directors but will be managed by a manager, commonly referred to as the (Managing Director), who will be accountable for the management according to the powers delegated to him by the general assembly.
Joint liability company
- A minimum of two shareholders are required for joint responsibility.
- The owners jointly undertake limitless personal liability.
Sole owner enterprise
One person forms a sole owner company, and the proprietor takes personal and unlimited liability.
A simple company
- A simple business is comparable to a partnership, with at least two and up to five partners contributing capital shares. To the extent of their company shares, the partners have limitless liability.
- The Registrar of Companies Department does not require a simple company to be registered. A notarized partnership agreement signed by all partners will suffice. The Registrar of Companies should receive a copy of the establishment contract.
Additional information
The LLC is the most commonly registered and used entity because it may be formed with just one shareholder, has limited liability, and can be used for any purpose (though some exceptions apply). Because the LLC, like other Iraqi businesses, must have an Arabic name, most foreign businesses are unable to preserve their names because they do not have an Arabic connotation.
The registration process for these types of businesses takes eight to twelve weeks from the time the application is submitted to the Registrar of Companies.
