Companies & Business Formation in Lebanon, Mattar Law Firm, Beirut
Find out in brief the reasons or advantages of forming a Company in Lebanon.(Click here)
In general, Lebanese Companies can be fully owned by foreigners.
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 :
The two categories of partnership:
• General partnership (Société en Nom Collectif – SNC)
• Partnership in commendam (Société en Commandite Simple – SCS).
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
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.
Lebanese law does not limit foreign interest in joint stock companies.
There are 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.
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.
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.
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 not subject to corporate 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 corporate tax.
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.
A Holding company is a special type of joint stock company governed by law No. 45/83 and to law no 772 dated of 11-11-2006.
Therefore, the activities of a holding company are strictly limited to the following:
- Own shares and participations in Lebanese or foreign anonymous or limited liability companies, established or participate in their establishment.
- Administrate companies in which it owns shares or participations
- Give loans to the companies in which it owns shares or participations and guarantee these loans towards third parties. For this purpose, the holding may contract any loans or borrow monies from banks or issue securities pursuant to the provisions of the code of commerce (trade), save that the total value of the issued bonds do not exceed, at any given time, five times the capital of the holding plus the provisions according to the last balance approved. The holding company cannot give loans to companies operating in Lebanon in which it has more than 20% of the capital (this principle does not apply on foreign investments)
- Own patents, inventions, privileges and trademarks as well as any other registered rights; lease the same to the companies operating in Lebanon and abroad.
- Own movable and immovable assets save to use the same for the purpose of its activities and business exclusively in conformity with the code on the acquisition of real estate rights by foreigners in Lebanon.
The minimum capital for establishing a holding company is LL 30,000,000. (Approximately US $20,000)
The chairman can be a non-Lebanese , provided he is resident abroad and he can practice without a work permit.
Members of the board and shareholders can be non-Lebanese as well.
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.
The Offshore company is one diversion of joint stock companies .(Regulated by Decree Law No 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. 667 USD).