Lebanon has a strategic geographical location, particularly suited to global businesses. Lebanon offers a wide range of investment opportunities in most of its business sectors. It also offers tempting opportunities when it comes to company registration and formation.
Lebanon welcomes foreign investors
There are no restrictions on foreign ownership in Lebanese companies except where specified otherwise by law.
Currently, company registration in Lebanon has become very simple and fast. Whether you are Lebanese or a foreigner you can profit from Lebanese companies’ several advantages and have your business registered in no time with a bank account and banking services.
Choose your types of companies in Lebanon
Entrepreneurs in Lebanon have access to several Lebanese business entities and the option selected depends on the type of business, its size, plans for expansion, and also on the available capital.
The types of companies in Lebanon are the following:
- Partnership (general or limited)
- Limited liability company (Société à Responsabilité Limitée) – SARL
- Joint Stock Company (Société Anonyme Libanaise) – SAL
- Foreign enterprise (Branch or Representative office)
- Commercial representation
- Holding companies
- Offshore companies
Partnership
A person can be a partner in an existing or recently formed partnership. Such partnerships take the structure of a separate legal entity and may transact business in its own name.
Under Lebanese laws there are two different types of partnerships:
- General partnerships (Société en Nom Collectif – SNC)
General partnerships are established by two or more persons who are personally and jointly responsible for the debts and obligations of the partnership. The bankruptcy of the partnership automatically results in the bankruptcy of the partners. The transfer of fractions in the partnership is subject to the unanimous agreement of all partners. Fractions are not negotiable. General partnerships may be governed by one or more partners or any person appointed in the articles of association.
- Limited partnerships/ Partnership in commendam (Société en Commandite Simple – SCS).
Limited partnerships are established by two types of partners:
- General partners with unlimited liability, who are in charge of administration.
- Limited partners with limited liability restricted to the amount of their capital contribution with no rights to intervene in the management of the partnership.
Limited liability company (Société à Responsabilité Limitée) – SARL
A Limited Liability Company is generally referred to in Lebanon as S.A.R.L. (“société à responsabilité limitée” in French).
The Law No.126 of 29/03/2019, has amended the Lebanese code of commerce, these amendments broadened the concept of a Limited liability company in accordance with the subsequent principle: The limited liability company is formed by one or more individuals who only bear the losses up to the amount of their contributions.
Features of a SARL;
- its capital requirement is a minimum of LBP 5,000,000
- It must have at least one partner and a maximum of twenty with a limited liability based on their contribution in the capital of the company
- it has no restrictions on foreign ownership of parts except for specific restricted sectors that have distinct requirements on the percentage of shareholding attributed to Lebanese nationals
- a SARLis managed by one or more managers who may not be partners
- transfer of social parts is subject to the prior approval of partners representing three-quarters of the capital and to stamp duties and to 10% capital gain tax.
- appointment of a Lawyer with annually retainer fees is necessary
- appoint an Auditor only if the number of partners exceeds 20
- a SARL company owned by a single partner may not be a single partner in another SARL company.
Joint Stock Company (Société Anonyme Libanaise) – SAL
A Lebanese Joint Stock Company (JSC) is governed by Decree-Law No 304 of January 24, 1942.
A Lebanese Joint Stock Company has to be comprised by a minimum of 3 shareholders.
The Liability of the shareholders is restricted to their shares in the company and the minimum capital for the JSC is LBP 30,000,000.
The company may call for public subscription and is permitted to issue financial instruments and bonds, and may allocate financial negotiable instruments or bonds.
The Company management is assigned to the board of directors which elects amongst its members a president. Board directors are elected by the general committee of shareholders.
The number of board members is fixed between a minimum of 3 and a maximum of 12 and most of the board members should be of Lebanese nationality.
There are no limitations on foreign participation in joint stock companies except for particular sectors and activities.
An auditor must be assigned by the company and the company’s name should be always followed by the abbreviation S.A.L.
A lawyer has to be assigned with annual fees as per Lebanese laws. JSCs are taxed 17% tax on corporate profit.
Foreign enterprise (Branch or Representative office)
A Foreign company seeking to do business in Lebanon can establish a branch that must have the same object as the mother company. The branch must be registered with the Ministry of Economy and Trade ensued by a second registration at the Trade Registry. A director for the local branch needs to be assigned and as well as a lawyer with annual fees.
The foreign company may choose to establish a Representative Office in Lebanon. But, the representative office’s activity is restricted to the promotion of the head office’s services and products. Hence, a representative office may not engage in business activities of any kind in Lebanon.
To set up a branch office or representative office, the foreign company’s Board of Directors must issue a proxy of attorney in favor of a Lebanese lawyer bestowing him with the authority to register the company in Lebanon, represent it and sign documents and do all the essential measures on its behalf.
The documents needed are :
- By-laws and articles of incorporation.
- Certificate of Incorporation.
- The Corporate resolution of the foreign company, resolving to:
(i) established the Branch in Lebanon,
(ii) assign a specific person as manager of the Branch and determine his powers, and
(iii) assign a Lebanese legal Counsel / Attorney to the Branch.
- A duplicate of the manager’s identification papers or passport as well as a copy of the lawyer’s “bar association” card.
Once the above documents are sent to Beirut, they must be approved by the Ministry of Foreign Affairs and submitted for translation into Arabic by a qualified translator.
Commercial Representation
Commercial representation is overseen and specified by a Legislative Decree of 1967 according to which a commercial agent may negotiate for the conclusion of sales or the supply of services on behalf of his principal.
The agent can act in the name of and for the accounts of the principal.
An agreement bestowing exclusive representation or distributorship to a person is regarded as an agency agreement and may be granted only to Lebanese nationals, except if the foreign agent is a national of a country that assumes the same mutual treatment to Lebanese nationals.
Holding Companies
A Holding Company is a different type of Joint Stock Company that has a limited object and gains from special tax treatment.
The minimum partner number and capital requirement are the same for Holding Companies as for joint stock companies.
The holding company can be solely owned and directed by foreigners and the non-Lebanese Chairman of a holding company is excepted from work permit requirements.
But the object of the holding company is strictly restricted to the following:
- Buying and subscribing to shares in Lebanese or foreign joint stock or limited liability companies,
- Overseeing the said companies.
- Lending money to companies in which it holds a minimum of 20% shares and or assuring such companies towards third parties.
- Holding and leasing patents, concessions, and trademarks,
- Acquiring movable or real estate assets that are essential for the holding’s operations.
The Lebanese Holding company enjoys numerous crucial tax advantages as it is exempted from income tax on its profits and on the distribution of earnings.
An auditor needs to be assigned and as for all Lebanese Holding companies and a lawyer has to be retained with annual fees.
Offshore Companies
An Offshore Company is a unique type of Joint Stock Company (legislated by Decree-Law No 46 of June 24, 1983, and its amendments especially law no.85 dated 10/10/2018). A Lebanese OffShore company founded in accordance with these articles shall be established by a Single Partner who is the sole shareholder, but which operates only in the Lebanese free zone and outside the Lebanese territory.
Features of an Offshore Company;
- it’s a special case of a Joint Stock Company
- it operates in the Lebanese free zones or abroad but is formed in Lebanon
- it doesn’t need Lebanese Nationals as Board members and could be entirely owned by non-Lebanese
- its capital minimum requirements of LBP30,000,000 can be denominated in foreign currency
- it has minimum shareholders of 1 and the shareholders can be non-Lebanese persons
- its board of Directors – 1 to 12 members, and can be completely constituted of non-Lebanese persons
- its chairperson may be a non-Lebanese national, and he represents the company and carries out the board decision
- the General Manager may be a non-Lebanese national
- the Chairperson and the General Manager of foreign nationality and foreign employees living outside Lebanon are exempted from work permits given that the total annual balance sheet of the company is at least one billion Lebanese pounds
- it is exempted from taxes on profits and dividends distribution, and contracts related to offshore activities are exempt from stamp duty
- transfer of shares is not subject to stamp duties and is exempted from taxation
- the appointment of a lawyer is compulsory if the capital exceeds LBP 50 million
- the appointment of a principal auditor is necessary
Offshore companies are exempted from acquiring the National Security Fund discharge letter for the submission and registration at the Commercial Register of the annual minutes of general assemblies’ meetings relating to the annual accounts.
If you’re thinking of starting a business in Lebanon and needed the right firm to help you with the whole process, let’s go ahead and contact your Damalion experts now.
