Amending the company contract, changing the managing director and transferring shares
An amendment of the company contract, a change of managing director or a transfer of shares is read from Companies Law No. 21 of 1997 as amended. The framework is on registering a company and on the function of the contract. The Law Office of Ali Barakat follows the question from Baghdad, al-Yarmouk.
Amending the company contract
If the agenda is confined to amending the company contract, increasing or reducing its capital, removing the chairman of the board or a member of it, merging, transforming or winding up the company, or selling half or more of its assets in a transaction outside its ordinary business, the quorum required for the first meeting must be present, under article 92, second paragraph. A decision to amend the contract of a joint-stock company, to increase or reduce its capital, to sell more than half of its assets in a transaction outside its ordinary business, or to merge, transform or wind it up, is taken only on the votes of a majority of the owners of the subscribed shares whose due instalments have been paid, unless the contract requires a higher proportion. In a limited company those decisions are taken only on a majority of the votes of the shares paid up on the date of the invitation, unless the contract requires a higher proportion. In a general partnership they are taken only on a unanimous vote of the shares, under article 98, second paragraph. If the votes in a limited company are equal, or if unanimity in a partnership cannot be achieved, the text allows the matter to be taken to a court, without naming that court.
An increase of capital in a joint-stock or limited company is made by a decision of the general assembly amending the company contract and issuing new shares. The Registrar is to approve a lawful application within fifteen days, or to refuse it by a written notice stating the legal reasons, under article 54. Decisions of the general assembly are sent to the Registrar within seven days of being taken, and the copy authenticated by the Registrar is a document that may be presented to any body, under article 99. The company contract is not valid until the Registrar has authenticated it, under article 203, within the limits to which article 19 refers.
Changing the managing director
In a joint-stock company, the board of directors appoints the managing director, fixes that director's remuneration and bonus, determines the functions and powers, supervises and directs the work, and may remove the director, under article 117, first paragraph. In a limited company, a general partnership and a sole proprietorship, the managing director has the same powers of the board as in the second to sixth paragraphs of article 117, subject to carrying out all work needed to manage the company within the functions and powers fixed by the body that appointed the director and in accordance with that body's directions, under article 123. The managing director is removed by a reasoned decision of the body that appointed the director, and a deputy is likewise removed by a reasoned decision of the body that appointed the deputy, under article 122 as amended by Law No. 17 of 2019. Each company may have a deputy managing director who exercises the managing director's powers in that director's absence, appointed in the same manner as the managing director, under the paragraph added to article 121 by that Law. The detail of authority and responsibility is on the managing-director page.
Transferring shares
In a joint-stock or limited company, a shareholder may transfer the ownership of shares to another shareholder or to a third party, subject to the restrictions in article 64, including that the founders of a joint-stock company may not transfer their shares to others until at least one year has passed from the date of incorporation, or until profits of not less than five per cent of the paid-up nominal capital have been distributed, together with the other prohibitions the article lists. In a limited company, shareholders have priority in buying the shares, under the notice and the thirty-day period in article 65; a sale to a third party at the same price as that offered by the shareholders, or at a lower price, is void. A sale of shares takes place in a council composed of the seller and the buyer, or their representatives, and a representative of the company appointed by the managing director. A contract is drawn up and recorded in the share-transfer register. Any sale that takes place outside the council, or that is not recorded in the company's register, is void, under article 66, with a special rule for the shares of joint-stock companies listed on the stock exchange.
In a general partnership, a partner may transfer the ownership of a share, or part of it, to another partner, and may not transfer it to a third party except with the unanimous approval of the general assembly. In every case the transfer is effected by amending the company contract, under article 69, first paragraph. In a sole proprietorship, ownership of the share is transferred by amending the company's statement, under article 69, second paragraph. Any transfer of ownership of shares otherwise than by sale must be recorded in the share-transfer register on the basis of a final judgment, under article 68, without repeating a description of a court that appears in the text.
The office follows a reading from Baghdad, al-Yarmouk.
Legal basis and sources
- Companies Law No. 21 of 1997, articles 54, 64 to 69, 92, 98, 99, 117, 122 and 123
- Amendment Law No. 17 of 2019
Frequently asked questions
Is a general-assembly decision enough to amend the contract without the Registrar?
No. The decisions are sent to the Registrar within seven days, under article 99, and the contract is not valid until the Registrar has authenticated it, under article 203.
Who appoints the managing director in a joint-stock company?
The board of directors, under article 117, first paragraph. The board also determines the functions, supervises the director and may remove the director. In other companies, appointment and removal are read from the body the company contract and the text name.
Is a sale of the shares of a limited company outside the council valid?
Article 66 treats as void any sale that takes place outside the council formed under that article, or that is not recorded in the company's share-transfer register, subject to the rule on listed shares.
Related topics and articles
- 01The company contract and internal rules: the function of each documentThe company contract and the statement before the Registrar under articles 13 and 14, distinct from any internal rules.
- 02The managing director of a limited company: authority and responsibilityThe managing director of a limited company: appointment, removal, and limits of authority under articles 117, 121(3), 122 and 123.
- 03General assembly meetings, quorum and minutesA general assembly meeting: the invitation, quorum, minutes and decisions under the Companies Law, and sending those decisions to the Registrar.
- 04Obligations that recur after a company is recordedFinal accounts, the audit, the general-assembly meeting and copies sent to the Registrar, distinct from post-incorporation steps and from branch duties.
- 05The address of a company or branch, a lease and a title deedThe company's address in its contract, before the Registrar and in the commercial register; a lease or deed may evidence it. Not a real-estate page.