South Sudan gained its independence from Sudan in the year 2011, it is one of the most recent sovereign states or countries with widespread recognition. The country is underdeveloped with South Sudan having little infrastructure. The country’s major export is timber to the international market. It is heavily dependent on agriculture.
A corporation with a share capital may be formed as either a private or public limited liability company in Sudan. The Companies Act of 1925, as revised from time to time, governs the incorporation of businesses in Sudan.
Company structure
The most common company structure in South Sudan is the limited liability country. The type of entities available for foreign investment include:
- Public limited company;
- Private limited company;
- Limited liability partnership;
- Registered Branch of a foreign company;
- Joint venture.
Limited liability company
In South Sudan, the limited liability company is the most commonly used by entrepreneurs. The government of Sudan also allows foreign corporates in search of businesses in the country to set up a permanent establishment in the form of a branch office or a representative office.
To set up an establishment, the entity must be in accordance with the South Sudan Companies Act. 2012 can be established by:
- a shareholder
- a director from any nationality.
There is no requirement that either of them must be a resident of South Sudan.
The government of South Sudan scrapped the requirement for minimum share capital for locally incorporated limited liability companies, foreigner on the other hand according to the investment promotion Act of 2009 are required to invest a minimum sum of US$100,000. There are prohibitions for foreigners to partake in transportation and foreign exchange business.
Private Limited Liability Companies
A distinction is made between a private limited liability company and a public limited liability corporation under the Act. The former cannot request to have its shares listed on the Khartoum Stock Exchange Market, but it can sell shares with the approval of other shareholders. Although a private corporation does not issue share certificates, shareholders must be registered in the shareholders’ registry. A private limited liability corporation cannot conduct banking or insurance activity, and it is not required to convene an annual general meeting. Both, however, have the benefit of incorporation in that stockholders are not at risk in the event of insolvency. A private limited liability business is not obligated to follow the same accounting regulations as a public limited liability company when it comes to recordkeeping.
Public limited liability companies
An LLC is not required to float its shares on the Khartoum Stock Exchange Market. Before doing business or borrowing money, an LLC must pay the minimum capital. It’s the company’s authorized capital. A public limited liability company can’t sell shares before receiving permission to operate. The Memorandum of Association must include the number of shares, the subscribers’ names, and the number of shares each will own. On incorporation, shares are distributed per the Articles of Association. Within a month, submit the return form to the Registrar.
When a public limited liability company sells shares for more than their nominal value, the extra money must be recorded in a premium account. Due to the government’s plan to privatize state-owned industries, Sudan is forming more PLCs. Public limited liability has perks. A publicly traded limited liability company gives investors more confidence. It also allows investors to grow their wealth by using its shares as collateral for loans or selling a portion of their interests.
The branch office
If a foreign company is looking forward to doing business in South Sudan, they are allowed to register as a local branch of its company that is oversea. Sudan LLC has restricted or closed some businesses, therefore the industry must be opened to foreign investment else they are denied access to it.
The branch office is the same as its parent company, so it is not considered a separate legal entity but must abide by both the laws of South Sudan and its country of origin. The branch is also compulsorily expected to appoint a representative from any nationality to represent the company in South Sudan.
The branch office is not permitted to conduct any activity that is aimed toward profit-making in South Sudan and it will only engage in activities that are limited to conducting market research and promoting the parent company’s products.
Joint venture
The nature of a joint venture in Sudan encompasses various legal forms from a legal standpoint. It could be a simple contractual arrangement in a framework that avoids forming a partnership. Joint operating agreements in the oil and gas industry, in which the government and other international firms are both parties, are an example of this sort of legal vehicle in Sudan. Each partner has the right to sell their portion of the items. This legal structure achieves many goals, including risk dispersion, cost minimization, and access to domestic and international capital. It could help with technological transfer once more.
A joint venture can take the form of a corporate partnership, with the primary goal of the legal entity being to continue doing business. The joint venture would benefit from being a limited liability business in such a legal structure. Income and capital gains are assigned to the members in their respective shares rather than to the corporate partnership, which has tax ramifications. Each participant is responsible for corporate tax on their portion of the business profits when it comes to corporate income.
Foreigners are also required to form a joint-stock venture with the majority of the shareholders to be local if they want to venture into the import/export or trading sector in South Sudan.
