What did Law No. 17 of 2019 change in forming an Iraqi company?

Anyone working from an old copy of Companies Law No. 21 of 1997 may gather papers that are no longer required, or plan around a minimum capital that no longer suffices. The Law Office of Ali Barakat, in Baghdad, al-Yarmouk, tracks what Law No. 17 of 2019 rewrote, arranged by the stage a business is at: before filing, while running the company, and when things go wrong. The amendment took effect on publication in the Iraqi Official Gazette, issue 4554, on 9/9/2019.

Before filing: who may be a member?

Article 2 of the amendment replaced article 12. An Iraqi person, natural or legal, may found, hold shares in, or be a partner in any type of company, unless barred personally or by status under a statute, a court decision or a competent government body. A foreign person, natural or legal, may join only joint-stock and limited companies, as founder or shareholder, and Iraqi holdings may not fall below fifty-one per cent of capital. That rule is the first thing to check in any venture with a non-Iraqi partner, because it shapes the company type and the split of shares from day one.

A shorter incorporation file

After the amendment, an application to the Registrar of Companies needs three attachments, under the new article 17:

1. The company contract.
2. A certificate from one or more banks showing that the capital required by article 28 has been deposited.
3. An economic and technical feasibility study, required for joint-stock companies only.

So the text does not ask a limited company for a feasibility study. Identity papers and powers of attorney that follow serve to prove who is signing, and are covered in Documents for registration.

Minimum capital and a debt ratio

The amendment replaced article 28 entirely. Minimum capital is two million dinars for a joint-stock company, one million for a limited company, and five hundred thousand for other types. It also introduced a new limit: liabilities may not exceed three times total capital plus other owners' equity. The Council of Ministers, on the Minister of Trade's proposal, can change these amounts and the ratio, so the latest decision in force should be checked before depositing.

The holding company, a new type with its own rules

The amendment added article 7 bis. A joint-stock or limited company becomes a holding company when it controls a subsidiary, either by owning more than half its capital and controlling its management, or by controlling the board of a joint-stock subsidiary. "Holding" must appear in its name and correspondence, a subsidiary may not own shares in its holding company, and the holding company prepares consolidated accounts for itself and its subsidiaries under international accounting standards. There is more in Holding companies.

In management: a deputy managing director, and removal by reasoned decision

A company may now appoint a deputy managing director who acts when the managing director is absent, appointed in the same way, under article 121(3). Removing the managing director or the deputy requires a reasoned decision by whoever appointed them, under article 122. In joint-stock companies, checking proxies for general assembly meetings moved to the Securities Commission, where they must be lodged at least three days before the meeting, under article 91.

When things stall: two dormant years open the way to liquidation

The amendment reworded two grounds in article 147: a company that has not started business two years after formation without a lawful excuse, and one that has stopped trading for more than two consecutive years without a lawful excuse. It added to article 158 that if the company does not recommend its own liquidation despite such a ground, and sixty days pass after the registrar's warning, the registrar must issue the liquidation decision itself, unless it sees reason to give the company more time. The company can object before the competent court within thirty days of notification; the court's ruling can be appealed in cassation to the court of appeal sitting in that capacity, with no further correction application.

Penalties and correspondence

The amendment toughened the penalty for trading in the name of a company or sole proprietorship before obtaining its certificate of incorporation, with imprisonment, a fine or both, and extended it to trading in the name of a foreign company branch without a registration licence, under article 215. Failing to keep required records, or filing official information late, now leads to sums collected from the company according to how serious the breach is, under articles 216 and 217. The schedule annexed to the law was renamed the "schedule of charges", and the Minister of Trade may amend it. New article 223 accepts electronic exchange and express mail for correspondence and filings with the registrar, as explained in Electronic company registration. And new article 222 gives Iraqi companies, including those with foreign partners, priority in government contracts.

The office follows these provisions from Baghdad, al-Yarmouk.

Legal basis and sources

1. First Amendment to the Companies Law, Law No. 17 of 2019 (Iraqi Official Gazette, issue 4554 of 9/9/2019)
2. Companies Law No. 21 of 1997

Frequently asked questions

Related topics and articles

• 01Documents for an application to form a company before the RegistrarDocuments to form a company are those in article 17 after 2019: the contract, a bank certificate, and a joint-stock feasibility study.
• 02Holding companies in the Companies Law after the 2019 amendmentA holding company is a joint-stock or limited company that controls a subsidiary, under article 7 bis added by Law No. 17 of 2019.
• 03Electronic registration of a company through the Registrar's platformElectronic registration before the Registrar of Companies under article 223, with no button-by-button platform guide.
• 04Partner disputes, a request for liquidation, and a challenge to general-assembly decisionsPartner disputes: causes of liquidation, and a 5% objection to general-assembly decisions before the Registrar and then the Court of First Instance.
• 05Obligations 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.

Always check the text in force and its amendments in the official source.

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