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Companies and Business
Incorporation in Lebanon
The choice
of the company's form depends on numerous
factors, such as its social object, number of partners,
capital required , taxation, turnovers, its projects and goals,
etc...
A lawyer must be retained regardless of the capital
investment for each company to be set up in Lebanon according to
the deontology code of Lebanese attorneys.
You can
contact our law firm corporate department
to know what is the most suitable form of business entity
depending on your vision and objectives.
Find below a glance at the most common companies type:
The
most important types of Companies/Businesses are :
1-Partnership (general or limited)
2-Limited liability company (Société à
Responsabilité Limitée) - SARL
3-Joint Stock Company (Société Anonyme
Libanaise) - SAL
4-Joint venture; and Foreign enterprise (Branch or Representative
office)
5-Commercial representation
6-Holding companies
7-Offshore companies
1-Partnership
The two
categories of partnership:
• General partnership (Société en Nom Collectif - SNC)
• Partnership in commendam (Société en Commandite Simple - SCS).
a-Partnership
Partnerships are formed of two or more people.
The main characteristic of this form is the personal contribution
of each partner since he all the partners are personally liable
for the company's debts and obligations.
No required capital is requested by law.
It must be registered at the commercial register since it is doing
a commercial activity.
The company name includes the names of some or all of the
partners and is usually followed by the words ‘and Co.’
.A partnership in commendam is a limited partnership with two
types of partners.
General partners who own and manage the business.
These are liable for all its obligations.
Limited - or silent - partners are financial contributors and
do not participate in the management. Their liability is limited
to their contribution.
b-Co-Partnership
(Société en Participation)
A co-partnership is a partnership known only to the parties
concerned in order to achieve a certain project and, since it is secret, cannot be registered. An
association agreement sets down the partners’ rights and
obligations, as well as their participation in profits and losses.
Each party is responsible for their own liabilities. Despite their
secrecy, the agreements inherent in co-partnership
are enforceable at law in cases of dispute.
2-Limited liability
company (Société à Responsabilité Limitée) - SARL
A limited liability company is formed between three to twenty members.
Its trade name
is usually anonymous, and is sequenced by the initials SARL and
name of the partners could be included in it.
The capital of 5 000 000 Lbp-Lebanese Pounds (which is the
equivalent of 3334 USD) must be fully paid up.
The liability of each partner is strictly limited to the value of
shares held by this partner.
The capital must be fully deposited in a bank under the company's name.
Management could be given to one or more partners, and a manager
cannot achieve on the company's behalf any deal or
transaction in which he has any kind of interest
Excepted in case of prior authorization is
granted.
Limited liability companies may not perform the following
activities :
Banking, financial operation and insurance.
The company must
be formed with the mutual consent of the members embodied in the
articles of incorporation/ memorandum of association which must be
notarized or signed before the clerk of the Commercial Register
where it is filed.
Legal incapacity or
bankruptcy of a member does not entail dissolution of the company.
Shares in a limited liability company are not negotiable and
cannot be transferred to third parties ,except in case the prior approval
of members representing at least 75 percent of the capital.
3-Joint Stock Company (Société
Anonyme Libanaise) - SAL
3.1
Formation
A joint stock company is
formed by
three or more persons.
It should have a minimum
authorized capital of 30 million LBP (The equivalent of 20 000 USD).
The shares in the
company entitles the shareholder to membership in the company, a
right to participate in management and a right to vote. These
shares are negotiable or transferable.
The liability of each
shareholder is strictly limited to the value of the shares held. The Board
of Directors must put aside 10 percent of the net profits to
form a
statutory reserve fund until such time as this reserve fund
becomes equivalent to one-third of the capital of the company. A
joint stock company must appoint an auditor.
3.2
Activities
Lebanese law does not limit foreign interest in joint stock
companies.
There is indirect limitations such as that the Board of
Directors must have at least a number of Lebanese members out of
the maximum twelve allowed.
Another limitation to joint stock companies is, whose object
is the acquisition of and trading in real estate in Lebanon. In
this case, 50 percent of the capital must be held by Lebanese
nationals.
With a small number of exceptions as mentioned above, such as real
estate, insurance, media companies, and banks), there are no real
limits on the amount of capital that can be held by foreigners.
The unlimited foreign participation principle is however mitigated
by requirements that a number of members of the board of directors
should be Lebanese and each member of the board is holder of a
limited number of shares.
Joint stock companies have, as well, the option to issue
shares and bonds convertible to shares. No person with a
criminal record (in Lebanon or abroad) or who has been declared
insolvent within the previous 10 years (unless rehabilitated) can
participate in company activities.
Each joint stock company incorporated in Lebanon must have
its registered office in the country.
3.3
Management
The board of directors, composed of at least three members and a
maximum of 12, is responsible for the company’s operations.
The board elects one of its members as chairman, who is
responsible for executing out the board’s resolutions.
If the chairman is a not Lebanese, he must have a work permit.
A shareholder meeting takes place at least once a
year. The number of votes each member has is equal to the
number of shares owned.
Shareholders may use power of attorneys or proxies to attend
meetings and vote on their behalf.
The shareholders’ ordinary meeting takes place shortly after
the end of each financial year to do the following:
discuss and finalize accounts, give quittance to the
management , distribute dividends accordingly,
designate new administrators and/or auditors and take any
other decision that should be taken in the interest of the
company.
4-Branch
Offices
Foreign companies wishing to do business in Lebanon have the
possibly of opening local branch or representative office.
To set up a branch office, the foreign company's Board of
Directors must issue a proxy/power of attorney in favor of a
person residing in Lebanon granting him the authority to
register the company in Lebanon, to represent it and to sign
documents and do all the necessary measures on its behalf.
The documents needed are :
A copy of the company's articles of association or incorporation,
and a copy of a resolution of the main company's Board of
Directors whishing to open a local branch or a
representative office, authorizing this and, nominating its
representative and giving him the necessary powers in order for
him to achieve his representation.
What is the difference between a representative office and a local
branch?
A representative office is an office that offers technical
assistance in the market and handles public relations.
By law, This kind of office can not perform any
commercial activity which could generate any business or
profit. Therefore costs and expenses are to be borne
by the outside foreign head office. Because of its nature, the
representative office is only subject to personal income tax.
A branch office, can undertake in general any commercial
activity, except that which by law requires a certain legal form
or conditions and/or that which is exclusively reserved for
Lebanese nationals and/or companies.
For these reasons, a branch office is subject to both corporate
and personal income tax.
5-Commercial Representation
Commercial representation is governed
and defined by a Legislative Decree of
1967 according to which a commercial agent may negotiate for the
conclusion of sales or the supply of services on behalf of his
principal.
The agent can act, in this case, in the name
of and for the accounts of the principal.
An agreement granting exclusive representation or distributorship
to a person is considered as an agency agreement and may be granted
only to Lebanese nationals, unless the foreign agent is a national
of a country that assumes the same reciprocal treatment to Lebanese
nationals.
Based on the above, these entities must meet the required
conditions:
Limited liability partnerships:
the
majority of the partners must be of Lebanese nationality, the
majority of the capital must be as well Lebanese-owned and the
authorized signatory should be Lebanese.
Joint stock companies:
The
shares should be nominative with the majority owned by Lebanese
nationals and two-thirds of the Board members the general manager,
should be Lebanese.
The termination of the
agency agreement entitles the agent to compensations,
notwithstanding any agreement to the contrary.
The Decree states, inter alia, that exclusive jurisdiction
regarding any dispute arising from the agreement is given to the
local court in the area where the agency agreement is carried out.
6-Holding Companies
A Holding
company is a special type of joint stock company governed by law
No. 45/83
Therefore, the activities of a holding company are strictly limited to the
following:
Acquisition of shares/equity;
Management and giving loans to companies operating within
Lebanon in which the company has a minimum of twenty
percent (20%) of the shares
Holding and leasing of patents, inventions, concession rights, and
registered trademarks
Purchase of goods and real estate needed for its operations.
.The minimum capital for establishing a holding company is
LL 30,000,000 (Approximately US $20,000)
As for the management the board must have a minimum
of two Lebanese nationals
The chairman can be a non-Lebanese , provided he is resident abroad and he
can practice without a work permit.
Board and shareholders’ meetings can be held outside Lebanon
The company must be registered in the Commercial Register and in a special
register for holding companies.
Holding companies as well benefit from tax exemptions and
advantages.
For instance, they are taxed at 6% in what relates to the
capital gains tax.
7-Offshore Companies
The
Offshore company is one diversion
of joint stock companies (Regulated by Decree Law N0 46 of
June 24, 1983) .
The Law no
19 dated 5/9/2008
amended the offshore companies regulations by easing its
conditions and enlarging the scope of offshore companies
activities.
It removed the condition of having two Lebanese nationals
in the company’s Executive Board which eases the conditions
for foreign investors and gives them more incentives to invest in
offshore companies in Lebanon.
As for the The chairman, he may be a non-Lebanese resident
abroad and may operate without a permit. The company is
registered both in the Commercial Register and in a special
register for offshore companies.
Off shores companies are formed in Lebanon, however they
operate only in the Lebanese free zone and/or outside the Lebanese
territory.
The last amendment mentioned above enlarged the scope of offshore
activities and therefore, off shore companies can perform the following:
- Negotiation and conclusion of agreements concerning goods and
products located outside the Lebanese territory or in the Lebanese
Free Zone
- Offering studies and consultations for the benefit of foreign
institutions,
- Using free zone facilities in order to stock imported goods for
re-exportation,
- Buying or renting real estate in Lebanon to the extent they are
necessary for the operation of the off shore company.
According to the last amendment
The added activities permitted to the offshore companies are:
-The administration of companies and institutions outside Lebanon
including the export of services, software of any kind to
these institutions.
-Operations of three-sided trade or multi-sided trade and
therefore negotiating and drafting contract, shipping goods and
reissuing bills for transactions out of Lebanon or in the Lebanese
free zone including the facility to store the goods in the free
zone in order to export it.
-Doing
activities related to maritime shipping.
-Acquiring shares of stocks in foreign corporations, companies or
institutions and to borrow to these institutions in which
the offshore company holds more than 20% of its capital
-Acquiring or benefiting from rights related to agencies or
commercial representation to foreign or non-residing companies or
institutions.
-Opening of branches and representative offices abroad.
-The construction, investments and administration in economic
projects except those prohibited by law.
-The creation of accounts and use of financial services to finance
its activities whether from local institutions or non-resident.
-The lease
or acquisition of offices or real estate in Lebanon in
relation with the activities of the offshore company.
.
An offshore company can not engage in banking
operations, insurance or any other commercial activity in Lebanon
and can not make any profits or revenues through
movable or immovable assets in Lebanon, or through providing
services to companies located in Lebanon, except for the interests
on its bank accounts.
Off shore companies benefit from tax exemptions since they are
only subject to an annual flat tax of LL 1,000,000 (Approx. US
$666).
The profits coming out of the sale of the offshore
company's fixed assets in Lebanon are taxed at a rate of 6
percent.
Salaries of the employees working at the offshore company
are taxed at rates varying from 2 to 10 percent.
Contact
Mattar law firm
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