A limited company with a single owner
A limited company with a single owner is a form that Companies Law No. 21 of 1997, as amended, allows as an exception to the starting point in article 4, first paragraph, which makes a company a contract between two or more persons. The frame is on company registration. A comparison with a sole proprietorship is on that page. The types are on the forms page.
What does the text allow?
Article 4, second paragraph, allows, as an exception to the first paragraph, a company to be formed of one natural person under the Law, referred to as a sole proprietorship; and a limited-liability company to be formed by a single owner in accordance with the Law. Article 8, second paragraph, point 1, repeats this exception: a sole proprietorship is formed of one natural person, or a limited-liability company is owned by one natural or legal person. The owner of a single-member limited company may therefore be a natural person or a legal person, unlike a sole proprietorship, which is confined to one natural person.
Liability in a limited company stops at the nominal value of the shares the owner has taken, under article 6, second paragraph, in the description of a limited company. In a sole proprietorship, the owner of the single share is under unlimited personal liability for all of the company's obligations, under article 6, fourth paragraph. That difference is the point of distinction, not the similarity that both may be formed by a single founder.
Article 4, third paragraph, remains in place: the owners of capital may not use their powers to harm the company, or to endanger creditors' rights by withdrawing capital or transferring assets when insolvency is imminent or when the law so prohibits. The presence of a single owner does not drop this limit.
The statement, the place of the general assembly, and personality
The founder of a limited company, when the company has no other founder, prepares a statement that stands in place of the company contract, and the rules that apply to the contract apply to that statement, under article 14. The minimum particulars are read from article 13 where they apply to the statement. The detail of what is written in the contract, or in what stands in its place, is on the contract page.
The owner of a limited company owned by one person stands in place of the general assembly, and the provisions of the Law apply except those that concern meetings, under article 101. A general assembly is not called in the sense of articles 86 to 96, while the remaining provisions that do not depend on a meeting continue to apply.
The company acquires legal personality from the date its certificate of incorporation is issued, under article 22, as a limited company with several members does. That differs from a simple company, whose personality begins when its contract is deposited with the Registrar, under article 183.
Separate estate, and a later increase in the number of owners
A single owner may not deal with the company's property as with that owner's own property; legal personality is separate, and the limit in article 4, third paragraph, remains. If the number of owners later increases, the amendment is read from the amendment page within the limits of the text, and not by a path of transformation the Law does not mention for that change.
The Law Office of Ali Barakat follows this reading of the form from Baghdad, al-Yarmouk.
Legal basis and sources
Frequently asked questions
Is a limited company with a single owner the same as a sole proprietorship?
No. A sole proprietorship is one natural person with unlimited personal liability, under articles 4, second paragraph, point 1, and 6, fourth paragraph. A limited company with a single owner is a limited-liability company, and its owner may be a natural or a legal person, under articles 4, second paragraph, point 2, and 8, second paragraph, point 1. Liability stops at the nominal value of the shares.
What is submitted to the Registrar in place of a contract among partners?
A statement prepared by the founder, which stands in place of the contract, under article 14, and to which the rules of the contract apply.
Does a general assembly meet in a limited company with a single owner?
Article 101 makes the owner stand in place of the general assembly, and excepts the provisions that concern meetings. General-assembly meetings in the sense of articles 86 to 96 are not held, while the remaining provisions that do not depend on a meeting continue to apply.
Related topics and articles
- 01A sole proprietorship or a limited company?A sole proprietorship has unlimited personal liability for one natural person. In a limited company, liability stops at the nominal value of the shares.
- 02Company 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.
- 03The 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.
- 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.