COMMERCIAL

COMPANIES
IN LEBANON

06

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

00

CONTENT

01

LETTER FROM
THE CHAIRMAN

02

JOINT LIABILITY
COMPANY

03

LIMITED PARTNERSHIP

04

UNDECLARED
PARTNERSHIP

05

JOINT STOCK
COMPANY

LIMITED LIABILITY
COMPANY (LLC)

07

PARTNERSHIP LIMITED
BY SHARES

08

HOLDING COMPANIES

09

OFFSHORE
COMPANIES

10

THIRD-FOREIGN
COMPANIES

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

01

LETTER FROM
THE CHAIRMAN

True to its mission of supporting the private

economy, the Chamber hereby undertakes to
assist prospective foreign investors all through
the establishment process.
The defining advantages of Lebanons investment
environment derive from its free enterprise system
distinguished by a high degree of openness to
foreign trade and the absence of restrictions
on capital movement. Such system naturally
safeguards private ownership of all form of
assets, and subjects local and foreign investors
to the same code of laws and regulations.
Hence, foreign investors retain full control over
their business and private assets, unhindered
by the constraint of an imposed local partner or
restrictions on business and investment decisions.

Evolution at the policy-making level continues

to build on the competitiveness of the
investment environment. The public-private
partnership approach certainly generates
abundant opportunities in building and operating
infrastructure projects.
Unscathed by the global financial crisis, the
banking sector in Lebanon further adds to
the attractiveness of the country as a host to
foreign investment. A fast-growing deposit base
combined with a high liquidity ratio render local
financing comparatively more accessible to
foreign investors.
We remain confident that improvement in the
countrys investment climate will be sustained
at the behest of liberal policy-makers as well as
Chambers of Commerce and other business
support organizations.

Mohamed Nizar Choucair,

Chairman

The

Chamber of Commerce, Industry

and Agriculture of Beirut and
Mount Lebanon is pleased to put
at the disposal of the business community the
present set of analytical guidelines pertaining
to the acts of incorporation under Lebanese
company laws. We deem this comparative
description of various forms of incorporation to
be a primer on the countrys business setup.

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

02

JOINT LIABILITY
COMPANY

OVERVIEW

A JOINT LIABILITY COMPANY IS A TYPE OF CORPORATION OR PARTNERSHIP INVOLVING TWO OR

MORE INDIVIDUALS WITH THE LEGAL CAPACITY TO UNDERTAKE COMMERCIAL TRANSACTIONS FOR
PROFIT. ALL PARTNERS INVEST THEIR MONEY, WORK, AND SKILLS, OR ANY PART THEREOF, IN THE
COMPANY, AND SHARE PROFITS AND LOSSES ACCORDING TO PERCENTAGES AGREED UPON.
PARTNERS ARE JOINTLY AND SEVERALLY LIABLE AND THEIR LIABILITY IS UNLIMITED.
THE TYPE OF ENTITY OF A PARTNER IN A JOINT LIABILITY COMPANY IS OF PRIMARY IMPORTANCE.

1- FEATURES

A joint liability company has the following features:

A- Partners are personally liable for the companys
debts. Their liability is unlimited. Creditors may
attempt to claim the whole debt from any of the
partners personally. Partners are severally liable
for the companys debts. Partners who settle the
companys debts may recover payment from the
company. They may also claim from other partners
the amount of debt they are responsible for.
B- A main feature of joint liability companies is the
sharing of profits and losses.
C- Partners in a joint liability company are
considered to be merchants by virtue of law.
Therefore, partners are those who naturally enjoy
the legal capacity to perform business. As a
result, bankruptcy of the firm means automatically
bankruptcy of the partners who then loose the
capacity to perform business due to liquidation of the
company.

D- The company operates under a trade name made

up of the partners names respectively. In the event
that all names are not mentioned, the trade name
or the mentioned names will be followed by and his
associates or and associates.

E- Partners in a joint liability company are not

allowed to give up their shares without prior consent
of all partners. Partners are able though to give up
their shares to other partners.
F- The company contract is always written.

2- ESTABLISHMENT OF A JOINT LIABILITY COMPANY

A company partnership agreement is drafted as an
official or ordinary document and may not be used
against others unless written.

3- PUBLICATION OF A JOINT LIABILITY COMPANY

A joint liability company contract is published by way

of affidavit of publication filed with the court of first
instance within the jurisdiction of which the company
falls, and filing of a summary of the companys
statements with the commercial register in the area of
the companys address, within one month from the set
up of the company.
Failing to file the constituting document of a joint
liability company with the court or to register it in the
commercial register, leads to the cancellation of the
company. The manager has the duty to register and in
case he/she fails to proceed, any partner can do so.
Any amendment to the partnership agreement must be
published as well.

4- MANAGEMENT OF A JOINT LIABILITY COMPANY

All partners are legally responsible for operations of

the company unless such operations are entrusted in the
company contract or in a subsequent document to one or
more partners or to one or more persons from outside
the company.
Managers of the company may not manage a similar
project unless with a special authorization from the
partners, renewable on a yearly basis. A manager may
not conclude a special agreement with the company in
which he or she may have a special interest.
Partners in a joint liability company are personally and
severally liable for the companys debts.
The partner appointed manager in the partnership
contract may not be removed unless for serious
reasons. The removal decision shall be reached
unanimously by all partners or by a majority of them
according to the bylaws of the company.
A company may resort to the legal system to remove
a manager.
In the event that the manager is a partner appointed by
an independent document, he or she may be removed
by the majority needed for the appointment.
A managers prerogatives are usually defined in
the partnership agreement or in an independent
contract. In case these prerogatives are not defined,
they shall be absolute.

5- DISSOLUTION OF A JOINT LIABILITY COMPANY

A joint liability company is ended by any of the following:

A- End of duration as set in contract
B- End of its purpose
C- Loss of company capital
D- Partners agreeing to end the company
Furthermore, the court may always declare a company
as ended based on the request of a partner or more. It
may also disqualify partners not fulfilling their obligations
towards the company.
REASONS JUSTIFYING THE DISSOLUTION OF A JOINT
LIABILITY COMPANY:
A- In the event of a decision by one of the partners
to withdraw from the company, if it had been set
up for an indefinite period of time, providing the
withdrawal does not harm the legitimate interests of
the company. Such withdrawal must be completed
at least three months prior to the end of the financial
year of the company. Such withdrawal shall become

effective between partners only after the end of

the financial year of the company. In the event that
the duration of the company is definite, a partner
may not withdraw before the end of the duration as
determined in the contract.

descendant (s) of the deceased partner are silent

partners.
In the event that the company consists of two
persons and one of them dies not leaving behind a
spouse or a descendant, it will legally cease to exist.

B- In the event of one of the partners being

declared as incompetent or absent by virtue of a
legal decision

The dissolution of the company is published in the

same way as its establishment.

C- In the event of bankruptcy of one of the

partners by virtue of a legal decision; In all cases
and in the event of the bankruptcy of one of
the partners, their incompetence, withdrawal, or
absence, the rest of the partners may unanimously
decide the continuation of their partnership
without the partner declared incompetent. Such a
decision must be registered with the secretariat of
the commercial register.
D- In the event of the death of a partner with
no spouse or descendants to whom rights may
be transferred, the company may continue with
the living partners. In the event of the death of
a partner with a spouse or a descendant, the
company continues with one of those and becomes
a limited partnership where the spouse and the

6- LIQUIDATION OF A JOINT LIABILITY COMPANY

The liquidation of a joint liability company includes

the collection and settlement of the companys
debts, and the conversion of its goods to money to
be distributed among the partners based on their
contributions to the partnership.
If the articles of the company do not appoint a
liquidator and the partners do not agree on one, it will
be up to the court in which jurisdiction the company falls
to appoint one. During liquidation period, the company
shall continue keeping its legal entity and the liquidator
shall take the place of the manager. By keeping its legal
entity, the company will also keep its trade name adding
to it in liquidation process. The end of the liquidation of
a company means the end of its legal entity.

A company shall comply with the undertakings of its

manager during his or her mandate.

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

03

LIMITED
PARTNERSHIP

OVERVIEW

A LIMITED PARTNERSHIP IS A FORM OF PARTNERSHIP SIMILARLY TO A JOINT LIABILITY COMPANY.

A LIMITED PARTNERSHIP HAS TWO CLASSES OF PARTNERS: THE GENERAL PARTNERS WHO ALONE
HAVE MANAGEMENT CONTROL AND HAVE UNLIMITED AND SEVERAL LIABILITIES FOR THE DEBTS OF
THE PARTNERSHIP; AND THE LIMITED PARTNERS, WHO OFFER THE MONEY, ARE ONLY LIABLE TO THE
EXTENT OF THEIR REGISTERED INVESTMENT, AND DO NOT ACQUIRE THE STATUS OF MERCHANTS.

A limited partnership exists under a trade name consisting

only of all or part of the names of the general partners. In
the case of one general partner only, the expression and
partners may be added.
In the event that limited partners allow for their names to
appear, they become liable towards third parties.
All general partners are considered merchants by
law. Thus only partners able to carry on commercial
activities are allowed to be general partners in limited
partnerships. Limited partners cannot have the status of
merchants.
Limited partners cannot participate in the management
whether directly or indirectly. When such participation
occurs, the limited partner becomes a general partner
having unlimited personal, joint and several liability, along
with the other general partners, for the acts carried out,
to the extent of the nature of such acts. Such liability will
be limited to the outcome of the activities carried out, or
for the entire debts of the partnership.
Are not considered as interference in management
control on behalf of limited partners, the following limited
partners activities:
a- Controlling the managers activities
b- Advising the manager
c- Allowing the manager to undertake activities
outside the scope of his/her prerogatives

2- FORMATION OF A LIMITED PARTNERSHIP

The formation of a limited partnership is subject to the

same rules as in a joint liability company: a written deed
signed by all partners defining dividends and general and
silent partners.
Theoretically, the regulations of a joint liability company
apply to all what is relevant to a limited partnership, as
far as formation, publication, and liquidation.
A limited partnership has limited and general partners.
General partners have the status of merchants and
their names appear in the companys title. They are
personally liable on the debts incurred by the firm, and
the bankruptcy of the latter means their bankruptcy as
well.
Limited partners do not have the status of merchants
and the bankruptcy of the firm does not mean their
bankruptcy, in that they are only liable to the extent of
their registered investment.

3- PUBLICATION OF A LIMITED PARTNERSHIP

As for a joint liability company, a limited partnership files

a copy of the partnership contract with the relevant court
of first instance registrar, and registers the contract with
the commercial registry, as well as any amendment to
the contract.

4- MANAGEMENT OF A LIMITED PARTNERSHIP

The general partners have management control in a

limited partnership. In case of more than one partner,
an agreement is reached in the contract or in a
separate report. Limited partners may not interfere
in the management of the partnership, even if by
proxy. The limited partner having interfered in the
management becomes otherwise jointly liable with the
general partners for the debts of the partnership. Such
liability will be limited to the outcome of the activities
carried out, or for the entire debts of the partnership.
Monitoring the activities of the general partners is not
considered as interference. Limited partners may have
positions in the firm not requiring representation of the
firm in front of others.

5- DISSOLUTION OF A JOINT LIABILITY COMPANY

Ending a limited partnership is subject to the same

rules applicable to a joint liability company. The death
of an only general partner or his/her bankruptcy or
incapacity, leads to the liquidation of the firm. In case
of more than one general partner, the death or the
incapacity of any does not lead to the dissolution of
the firm.

1- FEATURES OF A LIMITED PARTNERSHIP

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

04

10

UNDECLARED
PARTNERSHIP

OVERVIEW

1- FEATURES OF AN UNDECLARED PARTNERSHIP

An undeclared partnership is based on the personal

worth of the partners and ends for relevant reasons
such as incompetence, death, and bankruptcy
Undeclared partnerships are not subject to the
publication process applicab le to other commercial
companies. By definition, they are not known for
others, and therefore, not subject to registration in the
commercial registry.
Undeclared partnerships do not have a legal entity like
other companies. In the event that the main office is not
defined, legal proceedings may take place in the court
of the area where the partner being sued resides.
Undeclared partnerships do not have a legal entity
and therefore may not take legal actions against
others, and vice-versa.
Partners in an undeclared partnership deal with others on
behalf of themselves and vice-versa. No contracts may be
therefore concluded between an undeclared partnership
and any other party with regards to any matter.

In the event that an undeclared partnership declares

itself to others and operates independently from its
purpose, it will be considered as a real company and
thus becomes liable.
While mentioned in the Commercial Law, an
undeclared partnership is not necessarily considered
as a commercial company, even if its purpose is
commercial. An undeclared partnership is not subject
to obligations incurred by the merchants and neither to
bankruptcy rules.

2- MANAGEMENT OF AN UNDECLARED PARTNERSHIP

Partners agree among themselves to appoint an

individual who will manage the company. A manager will
deal with others without stating the partners names. In
the event that the partners do not appoint a manager,
each partner will deal with others on his/her own behalf
but in the interest of the company. Those who enter into
a contract with the manager or a partner will not have
a legal bond except with the partner with whom they
entered into a contract. Managers will be accountable
for their management to the company.

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AN UNDECLARED PARTNERSHIP
IS A TYPE OF CORPORATION
INVOLVING INDIVIDUALS IN A
PARTNERSHIP CONTRACT BY
VIRTUE OF WHICH PARTIES
AGREE ON SHARING PROFITS
AND LOSSES RESULTING FROM
THE COMPANY CONTRACT.
An undeclared partnership is different
from other partnerships in that its entity
is limited to the contracting parties
and it is not intended for third parties
to know. The contract signed freely
by partners sets their mutual rights
and duties and sharing of profits and
losses. An undeclared partnership
contract can be proved through all
ways of evidence accepted in the
commercial articles.

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

05

12

JOINT STOCK
COMPANY

OVERVIEW

THE LETTERS S.A.L FOLLOWING THE TRADE NAME OF A JOINT STOCK COMPANY ARE THE INITIALS
SYMBOLIZING IN FRENCH SOCIETE ANONYME LIBANAISE AND INDICATE THE PRESENCE OF AN
ANONYMOUS COMPANY MEANING A COMPANY WITH NO ADDRESS, WHERE THE NAMES OF ONE OR
ALL OF THE PARTNERS ARE SOMETIMES LISTED.
A joint stock company is a financial partnership involving three or more individuals owning shares of stock in the
company. The companys common capital is made up of the monetary and in kind offerings of the partners. A
joint stock company is different from a partnership. It involves shareholders who may not necessarily know each
other and who may not act nor speak on behalf of the company.
Contrary to a partnership, a joint stock company has a capital and is considered as a model for capital
companies. The capital of a joint stock company is divided into shares and shareholders own one or more
shares and are free to transfer their ownership interest at any time. Contrary to a partnership, the limit of the
shareholders liability in a joint stock company only extends to the face value of their shareholding.

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A joint stock company is always a commercial corporation regardless of its purpose. It is subject to commercial
laws and practices, and shareholders do not have the status of merchants. Joint stock companies are inevitably
members of Beirut Stock Exchange and must therefore pay a yearly subscription.

1-SUBSCRIBING SHAREHOLDERS (OR FOUNDERS)

The number of shareholders in a joint stock company

may not be less than three.
An individual who is declared bankrupt and has not been
reinstated since ten years at least, or who has been
indicted in Lebanon or abroad since less than ten years
for having committed or tried to commit felony, or fraud,
or embezzlement, or to cause prejudice to the States
finances, or to write checks with insufficient funds, may
not contribute to a joint stock company.

2- ARTICLES OF ASSOCIATION

The subscribing shareholders must draft the articles of

association of a joint stock company which must include
special items stipulated in the Commercial Law and
involving the shareholders. Such items must be included in
these articles which will become the chart of the company:
company name, purpose, duration, main office, capital,
number of shares, value and type of shares (nominal or
bearer), securities, profits distribution and management,
members of the board and their prerogatives.
A joint stock company used to be formed by virtue of
a government permit issued by a government decree.
Only after 1977, the founders of a joint stock company
were able to start the formation procedure by filing and
registering the articles of association with the notary
public. As a result, the government permit was not
needed anymore.

3- PUBLICATION IN THE NEWSPAPERS

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When founders decide to announce to the public

the possibility of subscription to acquire shares in
the company, they first have to publish the notice in
the official gazette, in a daily local general circulation
newspaper, and in an economic paper. Such a notice
must bear the names, signatures, and addresses of all
the founders, name of the company, its head office,
purpose, duration, capital, value of shares, prepaid
amount, profits distribution, number of board members,
and in kind offerings.

4- SUBSCRIPTION TO A JOINT STOCK COMPANY CAPITAL

Subscription to a joint stock company capital is done

through a written deed whereby an individual called
subscriber commits to buying a number of shares
from the company capital. Subscribers pay at least
the quarter of the price of the shares they want to
subscribe to. All company shares must be subscribed to
but this does not mean that payment for the full value
must be made. Subscribers must implement what they
committed to, meaning the payment of at least the
quarter of the value of the shares.
In the event that the company is not formed, the founders
must return to subscribers the prepaid amounts.

5- HEAD OFFICE OF A JOINT STOCK COMPANY

All joint stock companies must have a head office on the

Lebanese territories.

6- NATIONALITY OF THE COMPANY

A joint stock company formed and duly registered in

Lebanon is considered ipso jure Lebanese even if the
majority of shareholders are not Lebanese.

7- CAPITAL OF THE COMPANY: INCREASE-DECREASE

The capital of a joint stock company may not be less

than thirty million Lebanese pounds. It is divided into
shares of equal value of no less than one thousand
Lebanese pounds per share. At least one quarter of the
value of each share must be paid upon subscription.
The balance for each share will be settled on the dates
set by the board of directors.
The entire capital must be subscribed.
The minimum capital and partial payment may not apply
if the purpose of the company is insurance or banking
activities. Joint stock companies dealing with any of
those activities are subject to special regulations.
Amounts paid by shareholders will be deposited at
any recognized bank in a special account opened
in the name of the company followed by the phrase
under establishment with a list of the names of the
subscribers and the amount paid by each. These

amounts may be withdrawn after the company is formed

and registered in the commercial register.
The in kind contributions are subject to appraisal by an
expert duly appointed by the court.
Once the entire capital of the company is paid,
shareholders may increase the capital of the company in
an extraordinary general meeting by issuing new shares
of the same nominal value per share as the old shares.
Shareholders also have the right to decide the decrease
of the capital of the company in an extraordinary general
meeting, providing the decision does not harm the
rights of others. Such a decision must be published in
the official gazette to enable others to eventually object
within three months of the publication date.
The third of the capital of joint stock companies serving
public interest must be nominal shares for Lebanese
shareholders and may not be transferred but to
Lebanese shareholders.

8- SHARES

The capital of a joint stock company is divided into

equal value shares. This signifies equal rights offered
by share, equal liability for the companys debts,
and vote equality in meetings. Shares are movable
property. They represent part of the company capital
and can be circulated.
Owning shares gives shareholders the following rights:
1- The right to sit on the board
2- The right to take part in the management of the
company
3- The right to vote in general meetings
4- The priority in subscription when capital is
increased
5- The right to dividends
6- The right to relinquish shares and to put them
into circulation
7- In kind shares represent the in kind contributions s in
the company capital. They are subject to the same
rules applying to monetary shares with the exception
that:
a- In kind shares must be correctly appraised

Shares are divided into two categories:

A category based on the nature of contributions by
shareholders and representing in kind or monetary
shares offered by shareholders;
A category based on the type of shares: nominal,
to the order of, and to bearer;
a- Nominal shares registered in the stock
book of the company under the name of the
shareholder where the name of the shareholder
will be listed on the share itself
b- Shares to bearer which do not include the
name of the shareholder but a serial number
for the bearer of the share considered to be the
owner vis--vis the company
c- Shares emitted to the order of a shareholder
which do not get registered in the stock book
of the company and carry the name of the
shareholder including the condition of the order;
the last name will be considered as the rightful
owner of the share vis--vis the company
Shares may be converted from nominal to bearer
or from bearer to nominal, as long as the articles of
the company have not stated otherwise. But nominal
shares cannot be converted to bearer shares unless
the full value has been paid.

SHARES REMAIN NOMINAL IN THE FOLLOWING

CASES:

a- If their nominal value has not been paid in full

b- If they are shares owned by the board members
and deposited with the company to guarantee the
management

c- If they represent in kind contributions

d- If they are shares that must be owned by
Lebanese by virtue of the law or the companys
articles of association

PREFERENTIAL SHARES

All shareholders in a company enjoy the same rights and

share the same benefits. In all cases where the articles
of association of the company do not list otherwise,
preferential shares can be created by virtue of a decision
of an extraordinary general meeting. Such shares give
their owners preferential rights over material benefits
only. They may be created at the formation of the
company or during its life.

MULTIPLE VOTING SHARES

A share equals one vote, but the paid-up shares which

have been entirely paid and have been nominal for one
owner for at least two years before the convocation of
each general meeting, equal two votes.
8- Shareholders meetings
A general meeting duly formed is considered to be
representing all shareholders whether present or absent.
Decisions taken by virtue of quorum and by the
majority needed for each meeting, are binding for all
shareholders even the absent and the objecting.
A list must be set up including names of personally
present or represented shareholders with a mention of
their addresses, number of shares owned by each, and
number of votes given to each shareholder according to
the number of their shares.
The chief executive officer chairs the
shareholders meeting.
Shareholders elect an umpire amongst themselves
in each shareholders meeting. They also elect a
secretary who does not necessarily have to be from the
shareholders.
Shareholders do not discuss items not listed on
the agenda.
Each shareholder has a number of votes equal to the
number of shares owned or represented.

TYPES OF MEETINGS

FORMATION MEETING
The founders call for a formation meeting at the end of
the capital subscription.
The request must include the agenda of the meeting that
the founders must send to all shareholders.
The discussions of the founding general meeting are not
considered legal unless the number of its shareholders
represents at least the third of the company capital. If
the meeting fails for lack of a quorum, a new meeting
may be held by virtue of a notice published in the official
gazette, in an economic newspaper, and in a local daily,
over two times with one week interval. In the second call,
the agenda of the previous meeting is listed as well as its
results. Discussions in the second meeting are considered
legal if the number of its shareholders represents at least
half the company capital. In case there is no quorum, a
third meeting can be held whereby only the third of the
capital of the company needs to be represented.
As far as in kind shares, the quorum is calculated
according to the subscribed shares or shares owned by
the shareholders owners of the cash shares, regardless
of the shareholders owners of the in kind shares.
Decisions in the founding general meeting are taken
by the majority of two thirds of votes of present or
represented shareholders.
Founding shareholders elect among themselves:
1- a president to chair the meetings
2- umpires from the shareholders to ensure that the
procedure for founding the company has been duly
observed
3- a secretary for the meeting not necessarily from
the shareholders
A proof that the quorum was reached is the attendance
sheet signed by shareholders personally or through
their representatives.
The founding meeting asks the president of the court
in the area of the companys main office to appoint an
expert to check into the genuineness of the in kind

contributions in the case they exist.

15

before their representing shares in the company

capital are handed.
b- The value of the in kind shares must be
entirely settled at the formation of the company.
c- These shares may not be put in circulation
before two years starting the date of formation of
the company.

The founding meeting holds the prerogative to check

into the structural activities of the founders, to elect the
first board of directors, to appoint an auditor. When the
founding meeting has made sure that the procedure
for founding the company has been duly completed,
the board members have the obligation to publish the
company by registering it with the court register.
GENERAL MEETINGS
A general meeting is not legally held unless the
shareholders have been informed of documents such
as inventory, budget, profit and loss account, board of
directors report, and the control commissioner report,
and has been personally or through representation
attended by shareholders representing at least the third
of the capital. In the case that a quorum is not reached,
discussions in the second meeting are considered legal
regardless of the shares represented, in case otherwise
stipulated by the companys articles of association.
The general meeting is held at the companys head
office. A president, a secretary, and a controller are
needed, and an attendance sheet is set up.
The general meeting is held annually within six months
form the end of the financial year, to authenticate the
companys accounts, distribute profits if applicable, to
elect new board members in case of vacancies, and to
appoint control commissioners.
Decisions in the general meetings are taken by a simple
majority of the present or represented shareholders.
The meeting may not discuss other than the items listed
on the agenda. Are excluded unexpected and urgent
issues that arise during the meeting.

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EXTRAORDINARY GENERAL MEETINGS

Extraordinary general meetings have the right to amend
all aspects of the articles of association of the company,
but not to change the nationality of the company,
increase the commitments of the shareholders or
temper with third parties rights.
The number of shareholders constituting the
extraordinary general meeting must represent at least

two thirds of the company capital. If no such quorum

is reached, the meeting will call for another one based
on a notice in the official gazette, in an economic
newspaper, and in a local daily general circulation
newspaper, twice within a week of the first and second
notices. In the notice will be mentioned the agenda of
the previous meeting and its results. The discussions in
the second meeting are considered legal if the number
of the shareholders represents at least half the company
capital. In case there is no quorum, a third meeting can
be called for. The third meeting will be legal if at least
the third of the capital is represented.
In the case of decisions regarding a change in the
company object or shape, the legal quorum must always
represent at least three quarters of the company capital.
Decisions in extraordinary general meetings are taken
by a majority of two thirds of the present or represented
shareholders, regardless of the desired amendment to
the articles of association.
The amendment is made public the same way as with
the original articles of association.
The amendment of the articles of association of a
company is registered with the notary public in the area
of the head office of the company.

9- BOARD OF DIRECTORS OF A JOINT STOCK

COMPANY

The board of directors is constituted of at least

three members and a maximum of twelve members,
according to what the shareholders have decided in the
articles of association.
The majority of the board members must be of the
Lebanese nationality.
The members of the board of directors are elected
during the annual general meeting amongst the
shareholders who own a minimum of nominal shares,
as stipulated in the articles of association. These shares
are deposited in the company fund to ensure a good
management of the company.
These shares will remain nominal and may not be put
into circulation. They will remain as such as long as the

members of the board are performing their functions,

and until acquitted upon approval of the companys
budget at the end of the financial year of the start date
of their functions.
The maximum duration of the term of the members
of the board of directors appointed in the articles of
association is five years. Where members of the board
of directors elected by the shareholders are concerned,
they cannot be appointed for more than three years.
If the number of the board members goes to half or to
less than three between two annual founders meetings,
the remaining members of the board of directors must
call the shareholders for a general meeting to elect new
board members to fill the vacancies.
The members of the board do not assume management
of any similar company unless they get an annual
authorization during the annual shareholders meeting.
A board member may not be represented at the board
meeting but by another member and by virtue of a
written authorization.
In its first meeting, the board of directors elects the
chief executive officer-general manager of the company
and determines his/her prerogatives.
The board of directors may appoint a general
manager who will perform his/her functions under the
supervision and personal responsibility of the chief
executive officer.
No one can be member of the board of directors if
they have declared bankruptcy before and have not
been reinstated since at least ten years, or if they
have been convicted in Lebanon or abroad since
less than ten years for having committed or tried to
commit felony, or fraud, or embezzlement, or to cause
prejudice to the States finances, to intentionally
write checks with insufficient funds, or to hide the
acquisitions from such crimes.

10- PUBLICATION

PUBLICATION AT FORMATION
The first task of the board of directors is to register the
following in the commercial register:

1- Minutes of the companys founding meeting and

the attendance sheet
2- Minutes of the first board of directors during
which the chief executive officer-general manager
was elected and his/her prerogatives determined
3- The original articles of association duly
authenticated before a notary public
After publication is completely done, a company is
considered duly formed.
The bank where the subscription money has been
deposited will get certified copies of the aforementioned
minutes and the original articles of association. The
bank is thus informed of the founding of the company
and unblocks the capital that was blocked during the
subscription period.

commissioners may be elected year after year.

The Commerce Court will appoint an additional
control commissioner.
Control commissioners will present to the annual
meeting a report on the status of the company
and the balance sheet signed by them. The control
commissioner appointed by the court must approve the
report and balance sheet.
The law passed by decree 6102 dated October 5,
1973, exempted banks and other financial institutions
from appointing an additional control commissioner by
the court.
If the board of directors does not call for general
meetings when they are due, the control commissioners
may call for such meetings.

CONTINUOUS PUBLICATION
A company is subject to continuous publication as
follows:
1- The articles of association are hung on a board in
the company offices.
2- Anyone may obtain a certified copy of the articles
of association form the commercial register.
3- All papers and letterheads of the company must
show the name of the company, followed by S.A.L.
(socit anonyme libanaise), its capital, the freed
part of it, and the number of the company in the
commercial register.
4- Any modification of the articles of association
must be published.

12- FUND RESERVES AND DIVIDENDS

11- CONTROL COMMISSIONERS

Shareholders appoint one control commissioner or

more every year during their annual meeting. Control

14- DISSOLUTION OF A JOINT STOCK COMPANY

Ending a joint stock company is subject to the same

rules applicable to partnerships.
The company is dissolved:
A. By the end of its duration as set in the articles of
association.
B. After the execution of the anticipated project
for which it was established, or if it is impossible
to achieve it. In the event of a decision made by
shareholders at an extraordinary general meeting,
whereby at least the third of the capital of the
company needs to be represented, and the decision
shall be made by the majority of two thirds of votes
of present or represented shareholders.
C. In the event of loss of three quarter of the
company capital provided that the capital is fully
paid. In this case, the board of directors calls the
shareholders to hold an extraordinary general
meeting in order to decide the dissolution of the
company, the decrease of the capital of the company
or to adopt any other necessary measures.
In any case, every shareholder is entitled to evoke
this subject before the Commerce Court.

13- BONDS ISSUED BY JOINT STOCK COMPANIES

A bond (in a joint stock company) is a certificate

proving that a joint stock company has a debt. It creates
a burden on the companys capital and properties. Loan
rules apply to such a debt if it is not a secured type.
These bonds are subject to some rules when it comes
to their circulation and coupons are usually attached to
facilitate payment of interests.
Bonds are usually issued according to a serial

17

ANNUAL PUBLICATION
A joint stock company publishes yearly the companys
accounts and budget within two months from the approval
by the annual shareholders meeting of the accounts.
Such a publication will include the names of the members
of the board and the control commissioners.

A- FUND RESERVES
1- Legal reserve:
The board of directors must keep 10 percent of the
companys net profit to form a legal fund reserve
until such an amount equals the third of the capital.
2- Special reserve:
In addition to the legal reserve, the board of directors
may form other funds reserves according to the
needs of the company.
3- Distribution of dividends:
After deduction of expenses and funds reserves
from the gross income, the board of directors
distributes from the net profit what the annual
shareholders meeting decides as dividends.

number with a mention that they are equal, meaning

that the holder of such bonds does not enjoy any
priority over others.

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

06

18

LIMITED LIABILITY
COMPANY (LLC)

OVERVIEW

19

A LIMITED LIABILITY COMPANY COMBINES PARTNERSHIPS AND JOINT STOCK COMPANIES.

THE LEBANESE LEGISLATOR INTRODUCED THIS TYPE OF COMPANIES TO LEBANON BY
VIRTUE OF LEGISLATIVE DECREE NO. 35 OF 5 AUGUST 1967 IN WHICH PARTNERS ARE CALLED
ADMINISTRATORS, STOCKS ARE CALLED SHARES, AND COMPANIES DO NOT ISSUE CERTIFICATES.

1-CHARACTERISTICS OF A LIMITED LIABILITY COMPANY

A limited liability company resembles partnerships as it

is based to a large extent on personal considerations.
Indeed, a limited liability company only has a limited
number of partners who are often bound by family or
friendship ties. Public subscription is prohibited, and
the shares of partners may not be circulated. A limited
liability companys name may not include the name of
one or more partners.
A limited liability company is similar to joint-stock companies:
a.The partners who establish the limited liability
company are those who offer funds in cash or
in kind, and services may not be considered as
payment against the value of any share.
b.The minimum amount for the capital is five million
Lebanese pounds distributed in equal shares. If the
capital falls below five million Lebanese pounds,
the company must be transformed into a jointliability company or a limited partnership company,
otherwise the company must be dissolved.
c.A partner is not considered to be a trader, and his
responsibilities are limited to his offering of funds.
d.The announcement of the partners legal incapacity
and bankruptcy do not require the companys dissolution.
e.A limited liability company is commercial in form,
regardless of its object.
f.The administrators must deduct ten percent of the
net profits each year in order to constitute a reserve
of up to fifty percent of the companys capital.

2-ESTABLISHMENT OF A LIMITED LIABILITY COMPANY

20

A limited liability company is established based on a

contract of which the Articles of Incorporation are signed
by all the partners.
The Articles of Incorporation include: the companys
name, object, head office, capital, in kind and in cash
shares submitted by each partner. They may also
include the name of the director or administrators,
and all the conditions agreed upon by the partners, in
addition to the specification of the number of shares of
each partner, their payment in full, and depositing the

paid amount in a bank, as well as the specification of

the in kind shares in the company statutes.
The object of a limited liability company may not be
related to insurance, economics, supplies, organized air
freight, or banking and finance.
Partners may be legal entities.
All the partners may be of foreign nationality, but a foreign
director is only appointed after obtaining a work permit.
The capital must be deposited in full at an accredited
bank, in the companys name, in a private account
carrying the companys name followed by currently
being established. The capital amount must be held
in custody at the bank, pending the companys final
establishment, i.e. after the registration procedures at
the commercial register are completed.
Registration is made by depositing the articles of
incorporation at the commercial register.

3-PUBLICATION OF THE COMPANY

The companys establishment is considered to be

finalized after the shares are distributed among the
partners, and their value is fully paid up, and the paid
amounts are deposited in a bank.
Following this operation, the company must be
publicized. A limited liability company is subject to
the same publication rules as joint-stock companies:
depositing a copy of the companys articles of
association at the clerks office of the court of first
instance of the same jurisdiction as the companys head
office; as well as registering a summary of said articles
of association at the commercial register of the same
jurisdiction as the companys head office, within one
month of the companys establishment.
In-kind contributions will only be accepted after their
estimation by an expert appointed by the commercial
court of the same jurisdiction as the companys head
office. The value of any in-kind contributions must be
specified in the companys articles of association.

4-CONSTANT PUBLICATION:

The limited liability company expression, the capital

amount, and the registration number at the commercial

register must be clearly mentioned next to the company
name on all paperwork, advertisements, newsletters,
and any documents issued by the company.
Also, any amendment made to the companys articles of
association must be published.

5-THE ASSEMBLY OF PARTNERS

The partners shall meet in an assembly whose decisions

are issued according to the majority of votes.
The partners general assembly is convened yearly,
within six months of closing the years accounts. The
partners may be convened to an ordinary assembly,
especially for urgent matters such as dismissing or
appointing directors, or appointing auditors.
The director shall convene the partners to the meeting.
If the director or directors neglect to convene the
assembly, the auditors, if any, must take this measure,
else the invitation shall be sent through a partner or
group of partners that represent a quarter of the capital
and a quarter of the number of partners, or half the
capital at least.
The director shall deposit at the companys head office,
at least twenty days before the assembly, the directors
report on the companys activities during the year, the
inventory, the profit and loss statement, and the budget
with the auditors report, if any.
Each partner shall review these documents, and may
ask to consult at any time any registers and documents
related to the activities of the three previous years.
The assembly shall be convened through publication
in newspapers or invitations sent by registered mail to
the partners with the agenda, one month before the
scheduled meeting. The yearly assembly is convened in
principle for the approval of the accounts.
The yearly partners assembly approves the budget,
accounts, directors activities, profit distribution,

The assembly is only deemed legal if fifty percent of the

capital is represented.
Decisions in the ordinary assembly are taken according
to the simple majority of the present or represented
shares. If this majority is not achieved, and the
companys articles of association do not stipulate
otherwise, the partners are convened or consulted for
the second time, and decisions are issued with the
majority of the votes, regardless of the proportion of
capital represented.
The partners nationality may not be changed, and the
partner may not be forced to increase his obligations
unless the partners unanimously decide it. The
companys articles of association may not be amended
unless at least three fourths of the capital is represented
by the partners.

6- CONSULTATIONS IN WRITING

It can sometimes be agreed that the partners may issue

decisions in the form of written consultations, i.e. by
taking the opinion of partners separately in writing, with
the exception of the decisions pertaining to the approval
of the budget and tasks of directors.

7- MANAGING LIMITED LIABILITY COMPANIES:

The managing partner of a limited liability company does

not have the attribute of a trader.
a.The management of a limited liability company
may be entrusted to one or more directors, and
one of the partners must be appointed as director,
either by virtue of the articles of incorporation
or by virtue of a separate decision taken by the
partners assembly.
The appointment of the directors and their prerogatives
must be registered in the commercial register.

Whether he is appointed by virtue of the articles

of incorporation or by virtue of a separate
decision, the director shall be dismissed by
a decision taken by the partners assembly
notwithstanding any opposing text in the articles
of incorporation.
b.The director may not make any agreement with
the company that would profit him either directly
or indirectly, unless he is explicitly authorized to
do so by the partners.

8- THE AUDITORS

The auditors must take a decision by majority for the

appointment of one or more auditors.
Auditors are appointed for three financial years, and
may be dismissed by a decision issued by the majority
of partners.
The appointment of auditors is obligatory in the
following cases:
-If there are more than twenty partners
-If the capital of the company reaches thirty million
Lebanese pounds
-If one or more partners owning a fifth of the capital
request the appointment of an auditor
Auditors shall be selected from among the persons
listed on the experts roster.

9- TRANSFORMING THE COMPANY

A limited liability company may be transformed

into a joint-liability company, a limited partnership
corporation, or a partnership limited by shares, through
a decision taken unanimously by the partners. As
for transforming the limited liability company into
a shareholding company, it takes place through
a decision taken by the majority of the partners
representing at least three fourths of the capital,
provided the partners approved the accounts of the
two previous years.

10- DISSOLUTION OF THE COMPANY

A limited liability company may be dissolved for the

following reasons:
a.The end of its term as stipulated in the articles
of incorporation;
b.The end of the anticipated project for which it was
established, or the impossibility of its achievement,
or the elimination of its object;
c.The company is not transformed into another form
of partnership or joint stock companies when there
are less than three or more than thirty partners, or
its capital becomes less than five million Lebanese
pounds.
d.The company may be dissolved at any time by a
unanimous decision taken by the partners. Contrary
to joint-stock companies, a limited liability company
is not dissolved following the bankruptcy of one of
the partners, as long as there are three or more
remaining partners.
e.A limited liability company does not expire
following the death of one of the partners, but rather
the shares of the deceased are transferred to his/
her heirs. Likewise, a limited liability company does
not expire following the bankruptcy of one of the
partners or his/her loss of capacity, but he/she is
replaced by his/her legal representative.

21

appointment and dismissal of directors and auditors,

issuing authorizations to the directors for the tasks that
are beyond their authority.

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

07

22

PARTNERSHIP
LIMITED BY SHARES

OVERVIEW

A PARTNERSHIP LIMITED BY SHARES IS A COMPANY WHOSE CAPITAL IS DIVIDED INTO SHARES

OWNED BY KNOWN SHAREHOLDERS, WHO ARE RESPONSIBLE ACCORDING TO THE SHARES THEY
HOLD. AS FOR ACCREDITED SHAREHOLDERS, THEY MANAGE THE COMPANY AND ARE PERSONALLY
RESPONSIBLE IN SOLIDARITY OF THE COMPANYS DEBTS, AND THEY MAY NOT WAIVER THEIR
SHARES TO OTHERS.
The companys trade name is composed of the name of one or more accredited shareholders, followed by and
partners. The accredited shareholders manage the company and are accountable for all its debts.

23

In case of loss, the shareholders are responsible according to their contributions only, and their names are not
included in the companys trade name.

SHAREHOLDERS DO NOT HAVE THE ATTRIBUTE

OF A TRADER.

share the same responsibilities and sanctions that

result from mismanagement.

The manager or managers are usually appointed in

the companys articles of association, and may be
appointed through the minutes of the shareholders
general assembly. The law did not impose a limit
of shares that must be owned by a manager as a
guarantee for his/her position. The managers that are
appointed by virtue of the articles of association or
by the unanimous votes of shareholders may not be
dismissed, unless otherwise stipulated by the articles
of association, or the dismissal obtains unanimous
votes during the shareholders assembly.

Shareholders may not be appointed as managers in

the company, and their names may not appear in its
trade name.

the paid amounts must be deposited at an accredited

bank. If there are in-kind shares in the constitution of
the capital, they must be assessed by experts. The
law did not specify a minimum number of partners.
Nonetheless, and according to the general regulations,
the number of partners must not be less than two.

1-ESTABLISHMENT OF THE COMPANY

2-MANAGING THE COMPANY

THERE MUST BE AT LEAST THREE FOUNDERS.

The manager or managers are usually appointed in the

articles of association, and may only be dismissed upon
the amendment of the articles of association. If it is
necessary to appoint a manager during the companys
lifetime, this is done by a decision taken in the general
assembly, with the approval of the accredited partners.

24

All the obligations imposed by the law on the

members of the Board of Directors in a shareholding
company shall apply on the managers of a partnership
limited by shares, and therefore these managers

By virtue of the law, the establishment of a partnership

limited by shares is subjected to the same legal rules
pertaining to the establishment of a joint-stock company.

The capital must not go below thirty million Lebanese

pounds, divided into equal shares, the value of each
being a minimum of one thousand Lebanese pounds.
The capital in full must be subscribed to, and a quarter
of the value of the shares at least must be paid, and

Some or all of the accredited partners shall manage the

company, and the other partners may not interfere in the
management of the company.

The shares owned by accredited partners in a

partnership limited by shares are transferable in the
same manner as in joint-stock companies.

4-AUDITORS

There must be at least three auditors in a partnership

limited by shares, including the court-appointed auditor.
Auditors may not be appointed from among accredited
partners, but may be appointed from among the other
partners.
The articles of association may stipulate that auditors
shall be appointed for an unspecified duration. As
for auditors appointed upon the establishment of the
company, they are only appointed for one year.

5-GENERAL ASSEMBLIES

The general assemblies of shareholders follow the

same rules as those in joint-stock companies, i.e. there

is a constituent assembly, ordinary and extraordinary

meetings, and bondholder meetings.
A general assembly is composed of shareholding partners.
The decision taken in shareholders meetings only
becomes effective on accredited partners if it is
accompanied by their implicit or explicit approval; this
rule does not apply on the decisions pertaining to the
approval of the company accounts and budgets and
dismissal of the manager, as these accounts are by
virtue of the law under the supervision of the accredited
partners. However, the decision to dismiss a manager
only becomes effective upon the managers approval.

6-DISSOLUTION AND LIQUIDATION OF COMPANY

-The end of the project for which it was established

-The elimination of the object of the company
-The disappearance of its capital or of one of the
two categories of partners
-The impossibility of completing the project for which
it was established
-The partners will to dissolve the company before
the end of its term, with the personal approval of the
accredited partners
-The loss of capacity or bankruptcy of an
accredited partner
-The death of the accredited partner if he is the sole
one. If there are more than one accredited partner
and one of them dies, the company is not dissolved
but rather remains standing with the other partners.

The company is not dissolved if one of the partners

withdraws from it, but rather for the following reasons:
-The end of its specified term

25

3-TRANSFER OF SHARES

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

08

26

HOLDING
COMPANIES

OVERVIEW

THE LEBANESE LAW DOES NOT INCLUDE ANY DEFINITION FOR HOLDING COMPANIES. THE
CORRECT DEFINITION CAN BE BASED ON FOREIGN LEGISLATION AND THE OBJECT OF THE
COMPANY MENTIONED IN LEGISLATIVE DECREE 45 OF 24 JUNE 1983.

27

HOLDING COMPANIES ARE CONSIDERED TO BE INVESTMENT COMPANIES AND JOINT STOCK COMPANIES
IN PARTICULAR. THEY ARE SUBJECTED TO THE SAME PROVISIONS AS JOINT STOCK COMPANIES.

1-NAME OF HOLDING COMPANY

Like any joint-stock company, a holding company must

have a name that differentiates it and constitutes an
element of its legal character.
The expression holding company must be specified
next to the companys name.

2-OBJECT OF HOLDING COMPANIES

The object of a holding company is limited to the

following:
a.Owning shares in an existing Lebanese joint stock
company or a limited liability company, or participating
in its establishment.
A holding company may not directly own more than
forty percent in more than two companies working in
the same industrial, commercial, or non-commercial
sector in Lebanon if this constitutes a monopoly.
b.Managing companies in which it owns partnership
or shareholding assets.

28

c.Giving loans to companies in which it owns

partnership or shareholding assets, and offering them
guarantees against third parties.
A holding company may not give loans to companies
working in Lebanon if its share in their capital is less
than twenty percent.
The guarantee is made by virtue of a written
agreement between the holding company and the
company receiving the guarantee.
In order to make loan and guarantee operations, a

holding company may take a bank loan and issue

bonds, provided the aggregate value of the bonds
issued at any time does not exceed five times the
holding companys capital, in addition to the reserve
amounts, according to the last approved budget.
d.Owning patents, discoveries, concessions,
trademarks, and other reserved rights, and leasing
them to companies inside Lebanon and abroad.
e.Owning personal or real property, provided they
are only dedicated to its activities, subject to the
provisions of the Lebanese law pertaining to the
acquisition by non-Lebanese nationals of real estate
in kind rights.
The law on property ownership of foreigners in
Lebanon stipulates the exemption of non-Lebanese
legal entities from obtaining a permit if they wish to
own built property with a surface area not exceeding
three thousand square meters.

3-ESTABLISHING A HOLDING COMPANY

Holding companies are established in the form of a joint

stock company, and are subjected to the same regulations
as joint stock companies, with the following exceptions:
a.The capital of the company may be specified in a
foreign currency, accounting and budgets may be
prepared in the currency specified for the capital.
b.The companys main head office must be located in
Lebanon, where legal books and documents are kept.

c.A register shall be kept at the court of first instance

in Beirut for holding companies, and will include
all the data and information legally required to be
published by joint stock companies. When a company
is registered in said register, it must submit its lease
contract or property deed, or take a chosen location
in Lebanon with the written approval of the natural
person or legal entity that provided the location.
d.A holding company may only publish the fiscal year
budget and the names of the members of the board
of directors and auditors in the commercial register of
holding companies.
e.A holding company must keep accounting books,
prepare annual financial data, submit statements, pay
due taxes at the income tax department, by virtue
of the corporate legal provisions in a manner that
does not conflict with the provisions of the legislative
decree 45/83. A penalty of fifty thousand Lebanese
pounds a month shall be imposed on the holding
company that does not submit its legal statement in
a timely manner. This is in addition to the taxes that
are due.

4- MANAGING A HOLDING COMPANY

a.A holding company is subjected to a system that

guarantees the good organization of its business. The
legislator has exempted holding companies from the
obligation of having Lebanese persons or entities on
their Board of Directors. Also, the Chairman of the

Holding companies are considered de facto members of the

Beirut Stock Exchange and must pay an annual subscription.

5- THE TAX SYSTEM OF HOLDING COMPANIES

-A holding company must keep accounting books, prepare

annual financial data, submit statements, pay due taxes
at the income tax department, by virtue of the corporate
legal provisions in a manner that does not conflict with the
provisions of the legislative decree 45/83.
A penalty of fifty thousand Lebanese pounds a month
shall be imposed on the holding company that does not
submit its legal statement in a timely manner. This is in
addition to the taxes that are due. The statement must
be submitted each year on April first.

-A holding company is exempted from the income tax

on its profits.
-The interests gained by holding companies on the
loans of companies in Lebanon are subjected to the
income tax if these interests result from loans made
for a period less than three years.
-The improvement profit of the holding companys
transfer of its fixed assets and contributions and
shares in Lebanese companies is subjected to the
income tax.
-The amounts obtained by a holding company from
its affiliate companies in Lebanon in exchange for
administrative expenses and services are subjected
to taxation.
-The revenues obtained through the lease of
patents to companies located in Lebanon are
subjected to taxation.
-A holding company is subjected to an annual tax
of 6% from the total capital value, in addition to
the reserve funds, when this total does not exceed
50 million Lebanese pounds. The tax average is
decreased to 4% for amounts ranging between 50
million and 80 million Lebanese pounds, and to 2%
for amounts that exceed 80 million Lebanese pounds,
provided the total annual tax does not exceed five
million Lebanese pounds. This tax applies on a
holding company starting from the first fiscal year,
regardless of its duration.
-By virtue of the law, holding companies must pay their
due taxes in one single payment upon the filing of their
activity statements. A penalty of half in one thousand

per day of late submission shall be implemented.

-Holding companies are subject to the provisions of
Chapter II of the income tax law pertaining to the tax
on salaries.

6 EXPIRATION OF A HOLDING COMPANY

A holding company expires for the same reasons as a

joint stock company.

7- PENALTIES

Holding companies are prohibited from directly

practicing any activities that are not related to their
specified object. Penalties are imposed on companies
that violate this, either by subjecting them to the
provisions of the income tax that is implemented on
financial companies according to the year in which the
violation took place, in addition to a penalty of 20% of
the tax, or to a penalty of three per thousand of the
companys capital, in addition to the reserve funds,
provided the higher amount is levied.

29

Board is exempted from obtaining a work permit if

he/she is a non-Lebanese national residing abroad.
b.The Board of Directors and general assemblies
may convene outside Lebanon if the companys
articles of association stipulate this. However, the
annual ordinary general assembly must always be
convened in Lebanon, within a maximum time of five
months after the end of the fiscal year.
c.A main auditor residing in Lebanon and holding the
Lebanese nationality must be appointed. He may be
appointed for a duration of three years, and the company
is exempted from appointing an additional auditor.
d.A holding company may only publish the fiscal year
budget and the names of the members of the board
of directors and auditors in the commercial register
of holding companies.

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

09

30

OFFSHORE
COMPANIES

OVERVIEW

AN OFFSHORE COMPANY IS A JOINT STOCK COMPANY FOUNDED IN LEBANON AND PRACTICING ITS
ACTIVITIES OUTSIDE THE LEBANESE TERRITORY OR IN THE FREE TRADE ZONE.
No definition of an offshore company exists in the Lebanese law i.e. legislative decree 46 of 24 June 1983,
which established offshore companies, followed by amended law 17 issued on 5 September 2008. However,
we can deduce from the company denomination itself and its object that it is a joint-stock company that
practices its activity outside the country where it is located.

31

An offshore company is a commercial company that is registered at the commercial register in a special
register for offshore companies in Beirut, where data and information required by the law from joint stock
companies are published.

1-NAME OF OFFSHORE COMPANIES

Since it is a joint stock company, an offshore company

often has a creative name. Its name must always be
accompanied by the expression offshore and joint stock
company on all papers, advertisements, newsletters,
and other documents, in addition to the capital and
registration number at the commercial register.

2-OBJECT OF OFFSHORE COMPANIES

The object of an offshore company is specified by the

law as follows:

e.Owning stocks, bonds, shares, and contributions

in non-resident foreign companies and institutions,
and giving loans to the non-resident companies that
the offshore company owns more than 20% of their
capital.
f.Owning and/or benefiting from rights related to
representation of goods and foreign companies on
foreign markets.

a.Negotiation and signature of contracts and

agreements about operations and transactions
executed outside the Lebanese territory and related
to funds (goods and merchandise and elements of
fixed material assets) located abroad or in the free
trade zones.

g.Opening branches and representation offices

abroad.

b.Management of companies and institutions in

Lebanon whose activity is limited to outside the
Lebanese territory, and export of professional,
administrative, and organizational services, and all
types IT services and programs to companies outside
Lebanon, based on the request of such companies.

i.Leasing offices in Lebanon and owning the

necessary property for its activity, subject to the law
of the acquisition by non-Lebanese nationals of real
estate in kind rights.

c.Multiparty external trade operations taking place

outside Lebanon. For this purpose, offshore companies
can negotiate, sign contracts, ship goods, re-issue
invoices for activities outside Lebanon, or from and
to the free trade zones in Lebanon, for the storage of
imported goods with the aim of re-exporting them.

32

d.Sea transport activities.

h.Building, investing, managing, and owning all

economic projects, with the exception of those
prohibited by the law.

3-PROHIBITED ACTIVITIES

The companys articles of association must stipulate

that the offshore company may not exercise any
activity other than the one specified in the object of the
company.
Offshore companies may not deal with all types of
insurance operations, the transactions and activities of
banks and financial institutions and the institutions that

are subjected to the monitoring of the Central Bank.

Offshore companies are also prohibited from exercising
activities other than the ones that are specified, and
from making any profits or movable or immovable
revenues in Lebanon, or resulting from services provided
to resident institutions, with the exception of its bank
account revenues and the revenues resulting from
subscription to treasury bonds.

4-ESTABLISHING AN OFFSHORE COMPANY

Offshore companies are subjected to the same

regulations as joint stock companies, while taking into
account the following:
-The companys articles of association must
stipulate that it may not exercise any activity other
than the ones specified.
-An offshore company may keep its books in the
foreign currency, provided it remains equivalent to at
least thirty million Lebanese pounds.
-An offshore company may only publish the fiscal
year budget and the names of the members of the
board of directors and auditors in the commercial
register of offshore companies.

5-MANAGING OFFSHORE COMPANIES

Similarly to joint stock companies, offshore companies

are managed through a Board of Directors,
auditors, and general assemblies, with the following
characteristics:
-The members of the board of directors may be
non-Lebanese, and the Chairman or his legal
representatives do not need a work permit if they

6-CAPITAL

An offshore companys capital and accounts may be

designated in a foreign currency.
Offshore companies are considered de facto members
of the Beirut Stock Exchange and must pay an annual
subscription of one hundred US dollars.
A main auditor residing in Lebanon and holding the
Lebanese nationality must be appointed. He may be
appointed for a duration of three years, and the company
is exempted from appointing an additional auditor.

7- TAX SYSTEM

Offshore companies abide by a special tax system:

It should be noted that offshore companies similarly to
anonymous companies are required to keep books and
pay taxes, their main differences are the following:
- Offshore companies are exempt from tax on profits.
- All contracts and documents signed in Lebanon

and related to overseas business are exempt from

stamp duties.
- Profit shares distributed by the company are
exempt from tax on movable capital gains.
- Offshore companies are exempt from tax on
distributed dividends to natural or legal persons
living abroad
- Offshore companies are exempt from taxes on
amounts paid to natural or legal persons outside
Lebanon for any services provided overseas.
- Offshore companies are exempt from tax on
salaries and wages paid to workers and employees
hired abroad.
- The shares of the company and its shareholders
are exempt from transfer taxes and any related fees.
- Returns and revenues resulting from investing its
funds outside Lebanon are exempt from taxation.

8- OFFSHORE COMPANIES ARE SUBJECT TO:

a-Fixed annual tax: This LBP 1million annual tax is

directly paid to the income tax financial department
and is applied to all companies starting their first
fiscal year regardless of their duration.
b-Tax on improvement profit: profit received from
transferring the companys fixed assets are subject
to the tax stipulated in article 45 of the income tax
law regardless of the duration of their ownership.

c-Tax on salaries and wages: Lebanese and foreign

workers are exempt from taxes on salaries and
wages if they are working overseas.

Workers in Lebanon are subject to the tax on

salaries and wages:
-Lebanese employees working in Lebanon are
properly subject to the tax.
- Foreign employees working in Lebanon are
subject to the tax after deducting 30% of their
salary that shall be considered as a non-taxable
indemnity.
d-Some taxable capital revenues: in case these
revenues occurred in Lebanon or were due to
Lebanese residents.
According to the law, offshore companies shall settle
their due taxes in one single payment when declaring
their business and within the specified delays.

9- PENALTIES

If the company violates the object stipulated in legislative

decree No 46, amended by law No 19, it shall become,
for the year during which the violation occurred, subject
to the income tax applied on financial partnerships
operating in Lebanon in addition to a fine amounting to
50% (fifty percent) of the tax value.

10- DISSOLUTION OF AN OFFSHORE COMPANY

An offshore company is an anonymous company that is

dissolved for the same reasons causing the dissolution
of the latter. It shall also be dissolved if its activity does
not comply with its exclusive object.

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are non-Lebanese and reside abroad. The Chairman

and members of the Board are exempted from
the maximum limit stipulated by Article 154 in the
Commercial Law, i.e. the number of companies the
Chairman may manage or be a member of.
-Foreign workers in Lebanon are exempted from
obtaining a work permit, provided the annual
companys budget is not less than one billion
Lebanese pounds.
-The company does not have to appoint a legal
advisor unless its capital exceeds fifty million
Lebanese pounds or its aggregate annual budgets
exceed five hundred thousand US dollars.

Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon

10

34

THIRD-FOREIGN
COMPANIES

The following special provisions are applied:

The foreign company acquiring a moral personality in

its country of origin is entitled to enjoy all its rights:
the nationality of the company shall be determined
according to the location of its head office.

1-JOINT STOCK COMPANIES AND PARTNERSHIPS LIMITED BY

SHARES
This form of company, previously to starting any
activity, shall submit a statement to the Department of
Commercial Property at the Ministry of Economy and
Trade. The statement shall include the name of the
company, its head office, and capital.
These companies are required to be registered at the
Commercial Register in the area where their agency or
branch is located.
A- Required documents for the registration of joint
stock companies and partnerships limited by shares:

The Lebanese law recognizes the legal personality

of each company established in a foreign country in
compliance with the laws of this country where the legal
personality was acquired.

The foreign company abides by the laws of the country

of its nationality except for the provisions in opposition to
the Lebanese General Regulations.
Foreign companies shall abide by the provisions of the
Lebanese law related to the publication of companies:
They shall be registered at the Commercial register and
are required to keep books. They also abide by the
Lebanese fiscal law. The Lebanese courts are considered
competent to rule in lawsuits arising from transactions
executed by any of their branches in Lebanon.
Foreign companies operating in Lebanon abide by the
registration process.

To be submitted to the office for the protection of

industrial and commercial property at the Ministry of
Economy and Trade:
- A statement made in two copies of in which the
following shall be included:
- Name of the company
- Head office of the company
- Capital of the company
- Original deed of the companys articles of
incorporation and a copy of this deed.

- Decision of appointing one or two company

representatives in Lebanon in order to represent the
company before third parties and before the courts.
The above-mentioned documents shall be translated
into Arabic and certified as true copies of the originals
by the authorized party at the company. They shall also
be certified by the competent authorities at the head
office and the Lebanese Consulate.
These companies shall appoint a representative
who is entitled to conclude and sign any agreement
related to the companys business mentioned in its
status, and represent the company before the courts
of any instance as a plaintiff or defendant or in any
other quality.

Moreover, in case the main operations of a foreign

company were financial, it shall submit to the office
within the first three months of its fiscal year the
documents which were set according to the budget
of the previous year, provided that these documents
shall be certified as true copies by the authorized
person to sign on behalf of the company.

35

1-PUBLICATION SYSTEM:

TO THE COMMERCIAL REGISTER

- A statement made in two copies where the
following shall be included:
- Name and family name of each partner, except any
heir shareholder and partner, in addition to his date
and place of birth and nationality.
- Address and trade name of the company.
- Form of the company.
- Object of the company.
- Locations in Lebanon or abroad- where the
company has established agencies or branches.
- Names of the appointed persons whether they
were associates or non associates to run the
company, manage its affaires and sign on its behalf.
- Capital of the company.
- Extract of the status of the company.
Any amendment made to the status of the company
as well as any capital decrease or increase shall be
registered at the Commercial Register.

2- OTHER FORM OF COMPANIES

36

Those companies shall request the registration of their

agencies and branches at the Commercial Register

which happens to be located in their area.
The authorized agent of the specified foreign company
is required to deposit an extract of the articles of
incorporation and a statement made in two copies
including the following information:
- Name and family name of each partner, in addition
to his date and place of birth and nationality.
- Address and trade name of the company.
- Form of the company.
- Object of the company.
- Head office of the company and the location of its
agencies and branches in Lebanon.
- Capital of the company.
- Names of partners or appointed third parties to
run the company, manage its affaires and sign on its
behalf.

3- FOREIGN BANKS:

Foreign banks abide by the abovementioned general

regulations and the provisions of the Code of Money

and Credit which limited the practice of the banking

profession in Lebanon to the institutions established
in the form of anonymous societies. The Code of
Money and Credit imposed on foreign banks that
would like to establish one of their branches in
Lebanon to get a previous authorization from the
Central Bank of Lebanon.

4- FOREIGN INSURANCE COMPANIES:

Any foreign insurance company that would like to

operate in Lebanon shall: be a joint stock company
with a paid capital of no less than two billion and
two hundred fifty million Lebanese Pounds, of which
fifty percent shall be constituted of nominal shares.
The company should hold the nationality of a country
that applies reciprocity of treatment, and shall have
a legal representative, and obtain a license from the
Ministry of Economy and Trade and invest its funds
reserve in Lebanon: cash deposits, treasury bonds. To
guarantee its commitments, the law also requests the
company to make a cash deposit in an acknowledged
bank which amount differs according to the branches.