Understanding company ownership in Iraq
Foreign investors have difficulty understanding the legal framework around company ownership in Iraq, one of the common questions we get asked at Bite.Tech is how an Iraqi business can be invested in?
We interview Halim Gebeili, a partner from Newton Law Group who has kindly agreed to answer some of our questions on the subject.
Background including type of Iraq experience
Newton Law Group is a boutique law firm providing legal and consulting services in the Middle East and Africa, mainly in emerging markets in conflict zones. The firm has been assisting companies and investors all over Iraq and the Kurdistan Region and has more than seventy seven years of combined Iraqi legal experience.
How does the legal framework regarding company ownership compare with other countries in the Middle East?
Unlike many Middle Eastern and GCC countries, companies in Iraq can be incorporated with one shareholder only, and foreigners can also own the total capital share of the company.
What should foreign investors be aware of when considering taking shares of a local company?
The transfer of shares has to take place before the Company Registry. Buyer and Seller shall be present or represented by their lawyers. There is usually a mandatory sample form which has to be signed and file with the Company Registry in this respect.
Have there been any successful acquisitions of Iraqi companies by foreign entities?
There are many international companies which prefer to enter the local market by acquiring local companies. This is true across almost sectors, but acquisitions seem to be higher in number in the oil and gas and industrial sectors.
Why are foreign companies hesitant to take ownership in local companies?
Most of local companies do not have an organised management or accounting system. This is a significant obstacle. In addition, corporate governance laws need major updates in Iraq. In fact, the Iraqi system needs to become more reliable and protective to foreign investment.
What acquisition solution do foreign investors prefer when taking over full or part shares in local companies?
Local and foreign investors tend to structure their relationship in an offshore jurisdiction such as Dubai or Luxembourg or the Netherlands, by establishing a company and then registering a branch for this company in Iraq. This would facilitate the management and the transfer of shares throughout the lifetime of the company.
Do you foresee any changes to the legal framework in Iraq?
Reforms are gradually taking place, and the economy is still one of the largest in the Middle East despite the recent slowdowns for security reasons. The local authorities have been keen on introducing new laws and regulations related to many sectors such as IT and even VSAT technologies.