Holding companies in the Companies Law after the 2019 amendment
A holding company is not an independent type added to the list in article 6. It is a description of a joint-stock or limited company that controls a subsidiary, under article 7 bis, which was added by Amendment Law No. 17 of 2019. The frame is on company registration. Company forms are on their page. The rules of a joint-stock company, where that form is chosen, are on its page.
The official text of the article uses, next to the joint-stock company, a word that in this context means a limited company, which is one of the two forms a holding company may take.
When is a company a holding company?
A company is a holding company if it controls one or more joint-stock or limited companies called subsidiaries, in one of two cases: it owns more than half the capital of the company and also controls its management; or it controls the board of a joint-stock company, under article 7 bis, first paragraph. The company's name, in addition to its type, must be accompanied by the word “holding”, which is to be mentioned in all papers, announcements and correspondence issued by the company.
Attaching the word to the name is not enough if neither of the two cases of control is present. A holding company is not inferred from a mere holding that does not reach the threshold the text states, nor from a management arrangement that is not read in the light of those two cases.
What it may do, and what is prohibited
A holding company aims to support the national economy. It may own movable and immovable property within the frame of its activity; form subsidiaries and manage them, or take part in managing other companies in which it holds shares; invest its funds in shares, bonds and securities; make loans, suretyships and financing available to its subsidiaries; and own patents, trademarks, franchise rights and other intangible rights, and exploit them or lease them to its subsidiaries or to others, under article 7 bis, second paragraph. A suretyship here is a power the text organises for the benefit of a subsidiary. When such a contract is concluded, its terms are read from the suretyship page.
A subsidiary is prohibited from owning shares in the holding company, and any act that would transfer ownership of the shares from the holding company to the subsidiary is void, under article 7 bis, third paragraph. The holding company appoints its representatives on the subsidiary's board in proportion to its shareholding, and may not take part in electing the remaining members of the board.
The consolidated accounts, and the rules of the form chosen
At the end of each financial year the holding company prepares consolidated accounts and profit-and-loss statements for itself and for all of its subsidiaries, accompanied by the notes and particulars prescribed as international accounting standards require, under article 7 bis, fourth paragraph. Yearly accounts and their filing with the Registrar are also read from yearly filings.
The holding company is subject to the provisions of Companies Law No. 21 of 1997 according to the type of company it has taken, unless a provision of article 7 bis itself provides otherwise, under the fifth paragraph. If it is a joint-stock company, the joint-stock rules apply; if it is a limited company, the limited-company rules apply, together with the limits on control, the name, the consolidated accounts, and the prohibition on a subsidiary owning shares in the holding company.
The Law Office of Ali Barakat follows this reading of article 7 bis from Baghdad, al-Yarmouk.
Legal basis and sources
Frequently asked questions
Is a holding company a form independent of the joint-stock and limited company?
No. Article 7 bis makes it a joint-stock or limited company that controls a subsidiary in one of the two cases the article sets out. The word “holding” must be attached to the name, and the company is subject to the rules of the type it has taken unless a provision of the same article provides otherwise.
May a subsidiary own shares in the holding company?
No. Article 7 bis, third paragraph, prohibits that, and voids any act that transfers ownership of the shares from the holding company to the subsidiary.
Do separate accounts replace the consolidated accounts?
No. Article 7 bis, fourth paragraph, requires, at the end of each financial year, consolidated accounts and profit-and-loss statements for the holding company and for all of its subsidiaries, with the notes that international accounting standards require.
Related topics and articles
- 01Company forms under the Iraqi Companies LawCompany types under Companies Law No. 21 of 1997 as amended: joint-stock, limited, partnership, simple, sole proprietorship and holding.
- 02Private and mixed joint-stock companiesPrivate and mixed joint-stock companies: formation, the founders’ subscription, the certificate after the offering, and the board.
- 03Obligations 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.
- 04The 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.
- 05Registering a company in Basra: which department is approached, and what differs from Baghdad?Registering a company when dealing in Basra under the federal Companies Law, followed from Baghdad.