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The new Companies Law in Syria?

Guiding Principle

Syria’s relatively new Company Law No. 3 of 2008 was replaced in February 2011 with Legislative Decree No. 29 of 2011. When the previous text was passed in 2008, it replaced a 59-year old bill, the Commerce Law of 1949. The new Legislative Decree 29 of 2011 introduces new forms of companies and provides for more simplified procedures.

When the previous text was passed in 2008, it was replacing a 59-year old bill, the Commerce Law of 1949. The new text brings a number of additions and improvements to the rules regulating the establishment of companies in Syria, brings improvements to business sector and opens door for privatization.

Under the old Company Law, limited liability companies had to be established by at least two shareholders, whereas the new law has introduced the form of the "one-person limited liability company".

Although regulations governing this types of company are yet to be issued by the Minister of Economy, it is expected to ease the introduction of foreign investors. Among other improvements, the new law allows the transformation of state-owned entities into companies, the establishment of holding firms as limited liabilities and the establishment of non-public shareholding companies.

Another important change is related to shareholding companies. Previously, all shareholding companies had to be public where at least 45% of the share capital had to be raised through the Initial Public Offering (IPO). Under the new company law, if the founders choose to fully subscribe to the company capital without a public offering, then the company shall have the form of a "private shareholding company".

Private Joint Stock Companies will need a minimum number of five shareholders, while the minimum threshold for Public Joint Stock Companies is 25. The founding shareholders of a Public Joint Stock Companies are now also eligible to own up to 75 percent of the shares of a company (but at least 10 percent) from a maximum of 55 percent previously.

There is no ceiling on ownership of shares by non-Syrians in companies; non-Syrians must, however, pay their contribution to the capital in hard currency. Syrian regulations still impose a minimum capital requirement on all forms of companies, where such minimum requirement is not stipulated in the law, but is rather determined by Ministerial Decisions that are subject to change according to market requirements.

Limited liability companies will need to have a minimum capital of SYP 1 million, while partnerships will need a minimum capital of SYP 300,000. In order to ease the establishment of limited liability companies, investors will be able to apply to set-up their company through the regional offices of the Syrian Investment Agency, the Industrial Cities located across the country or the Domestic Trade Directorate of the Governorates.

Another important feature included in the new law is the option given to state-owned entities to change into a Public JSC form. Currently state-owned institutions operate under specific regulations. However, in case they decide to switch to a shareholding form and after having obtained the approval of the Prime Ministry, they will have to abide by the Company Law.

Although the law clearly says that state-owned companies can go public, it does not mention whether that could go as far as offering a majority of the shares for trade, or in other words privatizing them.

October, 2011 Tareq Jeroudeh
  Meyer-Reumann & Partners -Dubai

 

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