Project Medco - T

Report
What you need to know to start a
company in Lebanon,
the United Arab Emirates and
Saudi Arabia
To: Engineering Management 654
“Technology Entrepreneurship”
American University of Beirut
8 April 2013
By: Rindala Beydoun
Celine Bsaibes
Magda Farhat
2
Section 1: Most Used Companies in Lebanon
Section 2: Most Used Companies in the United
Arab Emirates (UAE)
Section 3: Most Used Companies in Saudi Arabia
(KSA)
3
Section 1: Most Used Companies in Lebanon
The most widely used companies in Lebanon are:
 The limited liability company (known as SARL - Société à Responsabilité Limitée); and
 The joint stock company (known as SAL - Société Anonyme Libanaise).
Said forms of companies limit the liability of the shareholders to their capital contribution. In other words, in case of
losses, the risks of a shareholder are those of losing the capital it contributed without its personal assets being at
stake.
SAL and SARL have different minimum capital requirements and shares are more easily transferred in a SAL compared
to in a SARL. This usually reflects the main difference between the SAL and SARL which is that SAL is more anonymous
in nature in the sense that the identity of the shareholders does not play an important role in the company’s business.
Other forms of widely used Lebanese companies are the holding company and the offshore company which are joint stock
companies with certain particularities mainly related to the nature of the activities they exercise:
 The holding company is defined as a company that owns other companies' outstanding stock. The term usually
refers to a company which does not produce goods or provide services; rather, its purpose is to own shares in other
companies.
 The offshore company is a company incorporated in Lebanon, but can only operate outside the Lebanese territory.
4
Time to Incorporate
Cost of Incorporation
Minimum Share Capital
Requirement
Office
Partners/Shareholders
Foreign Ownership
Limited Liability Company (S.A.R.L.)
Joint Stock Company (S.A.L.)
2 to 3 days
2 to 3 days
Around USD 1,300
(excluding legal fees)
Around USD 1,800
(excluding legal fees)
5,000,000 L.L.
30,000,000 L.L.
Office in Lebanon required
Office in Lebanon required
3 to 20
3 or more
100% foreign ownership allowed.
Foreign ownership allowed except for the guarantee shares held
by the directors.
Exception: for commercial representation activities, the majority
of the capital should be held by Lebanese and the
chairman/general manager should be Lebanese.
Exception: for commercial representation activities,
(i) the majority of number of shareholders should be
Lebanese nationals; and (ii) the majority of share
capital should be held by Lebanese nationals
Management
1 director or more managing the company that can
be a non-shareholder
(the director(s) may not be Lebanese)
Board of directors composed of 3 to 12 members, the majority of
whom should be Lebanese
(a chairman/general manager shall be elected)
Banking, financial and insurance activities
none
Shares cannot be transferred to third parties, unless
prior approval of shareholders representing at least
75 % of the capital
Free transfer of shares
Lawyer
Required
Required
Auditor
Not required except if there are more than 20
shareholders or the share capital is L.L. 30,000,000
or more
Required
Restricted Activities
Share transfer
5
In addition to the general rules governing the joint stock company in Lebanon, the holding and the
offshore companies are governed by specific rules set forth respectively in decree-law 45/1983 and
46/1983:
Holding Company
Activities
Offshore Company
The activities of a holding company are restricted to
the following:
The activities of an offshore company are restricted to
10 activities, mainly:
-
-
-
Acquiring shares in joint-stock or limited liability
companies, or in public or private Lebanese or non
- Lebanese companies.
Managing companies in which it holds shares.
Lending companies in which it holds shares.
Possessing and licensing intellectual property rights
such as patents, discoveries, concessions, registered
trademarks and others.
Holding moveable or immoveable assets provided
that such assets are used solely for the operations of
the company.
-
-
Negotiating and signing contracts and agreements
related to operations and deals to be executed
outside Lebanon.
Managing companies which operate outside
Lebanon.
Acquiring shares, bonds and participations in
foreign
non-resident
establishments
and
companies, and granting loans to non-resident
establishments in which capital the offshore
company holds more than 20%.
Opening branches and representation offices
abroad.
An offshore company is prohibited from engaging in
industry, banking, operations, insurance or any other
commercial activity in Lebanon. It is also prohibited
from earning any profits or revenues through
moveable or immoveable assets in Lebanon, or
through providing services to companies located in
Lebanon, except for its interests on its bank accounts.
Advantages
-
The holding company is exempt from taxation on
profits and dividends’ distribution.
-
-
Board members can all be foreigners.
-
Annual lump sum tax of L.L. 1,000,000; an
offshore company is exempt from taxation on
profits and dividends’ distribution.
Board members can all be foreigners.
6
Section 2: Most Used Companies in the UAE
 One of the most widely used companies in the UAE is the limited liability company (LLC) in which
each partner’s liability is limited to the extent of its share contribution in the capital. The LLC can
carry out all kinds of activities except insurance, banking and investment activities.
 The private joint stock company (PJSC) is less widely used in the UAE. The shares of a PJSC cannot
be offered to the public or for public subscription unlike the public joint stock company.
Foreign ownership in both the LLC and the PJSC is limited to 49% of the share capital of the company.
However, foreign investors can achieve near 100% ownership of LLCs via what is known as the “local
sponsorship scheme documents”.
 Free zone companies are defined as special purpose vehicles that can be suitably used as
investment companies, holding companies, real estate holding companies, for investments
purposes inside and outside the UAE and for international trading. Free zone companies can be
100% owned by foreign investors.
 Offshore companies can be set up in some of the UAE free zones such as Jebel Ali Free Zone and
Ras Al Khaimah Free Zone. No office is required.
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Limited Liability Companies (L.L.C.)
Private Joint Stock Company (P.J.S.C)
14 working days
--
Around AED 40,000
(around USD 10,900)
--
AED 300,000
(around USD 81,670) (Dubai)
AED 2,000,000
(around USD 544,500) (Dubai)
Office in UAE is required
Office in UAE is required
Minimum 2 and maximum 50
3 or more
Foreign Ownership
49% foreign ownership (100% Gulf Cooperation
Countries’ (GCC) ownership allowed for most sectors)
49% foreign ownership
(100% GCC ownership allowed for most sectors)
Management
1 director or more managing the company.
Board of directors is optional if there is more than
one director provided the directors are chosen among
the shareholders and their number does not exceed 5
Board of directors composed of 3 to 15 members.
The chairman and the majority of the board of directors
should be UAE nationals
Liability
Limited to the number of shares held in the company
Limited to the number of shares held in the company
Shares cannot be transferred to third parties without
the prior approval of shareholders representing at least
75 % of the capital
Free transfer of shares
Banking, finance and insurance activities
none
Required
Required
Time to Incorporate
Cost of Incorporation
Minimum Share Capital
Requirement
Office
Partners/Shareholders
Share transfer
Restricted Activities
Lawyer /Auditor
8
UAE Free Zone Companies
 A free zone company is subject to free zone regulations. This type of company can be established either as:



a free zone establishment (FZE) in which the sole shareholder is an individual or a corporate entity;
a free zone company (FZCO) composed of 2 or more shareholders (individuals or corporate entities); or
a branch of a foreign company.
 The main advantages of free zone entities are as follows:

100% foreign ownership (no local partner or sponsor);

Fast and easy incorporation process;

No minimum share capital requirement;

Guaranteed income tax exemption;

Duty free imports of goods into the free zone; and

Facilities concerning licensing, work permits and residence visa.
 The main disadvantage:

Cannot sell goods or provide services inside the UAE.
 Few examples of Dubai free zones:




Dubai Airport Free Zone (DAFZ)
Dubai Silicon Oasis
Dubai Technology and Media Free Zone (TECOM)
Jebel Ali Free Zone (JAFZ)
9
Offshore companies are allowed to:




open bank accounts in the UAE;
become shareholders in a new or existing company in the UAE and other jurisdictions;
hold shareholders’ and directors’ meetings within the UAE; and
carry out international trading.
Offshore companies are not allowed to:
 carry on business with persons resident in the UAE;
 own an interest in real estate property situated in the UAE, other than a lease property
referred to in the regulations or approved by the authorities;
 carry on a banking business;
 carry on business as an insurance or re-insurance company, insurance agents or insurance
brokers; and
 carry on any other business which may, by regulations, be prohibited by the authorities.
10
Section 3: Most Used Companies in KSA
 One of the most widely used companies in KSA is the limited liability company (LLC) in which
each partner’s liability is limited to the extent of its share contribution in the capital.
 The joint stock company (JSC) is less widely used in KSA. The shares of a JSC can be offered
to the public or for public subscription provided that the capital of the company in this case
should exceed SR 10,000,000 (around USD 2,666,540).
 Foreign ownership in both the LLC and the JSC should be licensed by the Saudi Arabian
General Investment Authority (“SAGIA”) which is in charge of regulating foreign investments
in KSA and issuing the relevant licenses to foreign investors. Note that SAGIA is showing
reluctance to issue licenses lately.
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Eligibility of the foreign investor to invest in KSA
 The main condition required for obtaining the SAGIA license is that the business related to goods,
services as well as the methods of production, must comply with KSA industry regulations and
Shari’ah.
 Another important condition for obtaining SAGIA’s license is that the amount of capital invested should meet
the minimum capital required by SAGIA that varies according to the project of the investment:
 For industrial development projects, the capital invested must not be less than SR 2 million (around USD
533,300)
 For other investment projects, the capital invested must not be less than SR 500,000 (around USD
133,320)
 Subject to the above capital requirement, foreign investors are allowed to invest in all KSA business activities
except certain activities that must be owned 100% by KSA/GCC nationals or wholly-owned KSA/GCC
companies.
Few examples:




Oil exploration, drilling and production
Manufacturing of military equipment
Manufacturing of explosives for civilian use
Services such as security, recruitment and employment, land transportation, printing and publishing
 GCC investors are allowed to invest in all KSA business activities with few exceptions.
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Limited Liability Company
(L.L.C.)
Joint Stock Company (J.S.C.)
4 weeks
3 months
SR 500,000
(around USD 133,330)
SR 2,000,000
(around USD 533,320)
Office in Saudi is required
Office in Saudi is required
Minimum 2 and maximum 50
5 or more
Subject to SAGIA’s license:
100% foreign ownership except for certain
activities for which only 75% foreign ownership
is allowed (commercial distribution –
engineering services – legal services –
architecture services)
Subject to SAGIA’s license:
100% foreign ownership except for certain
activities for which only 75% foreign ownership is
allowed (commercial distribution – engineering
services – legal services – Architecture services)
1 director or more managing the company.
Board of directors is optional if there is more
than one director
Board of directors with a minimum of 3 members.
Liability of shareholders
Limited to the number of shares held in the
company
Limited to the number of shares held in the
company
Share Transfer
Shares cannot be transferred to third parties
without prior approval of shareholders
representing at least 75% of the capital
Free transfer of shares
Time to Incorporate
Share Capital
Requirement
Office
Partners/Shareholders
Foreign Ownership
Management
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Contact Details
DUBAI OFFICE
Level 41
Emirates Towers
Offices
Sheikh Zayed Road
P.O. Box 72545
Dubai, UAE
Tel: +971 4 319 9977
Fax: +971 4 330 3365
RIYADH OFFICE
Altakhassusy Street,
across Prince Sultan Street,
Alhakbany Buildings
Building No 5, 1st Floor
P.O. Box 67677
Riyadh, Saudi Arabia
Tel: +966 1 482 3733
Fax: +966 1 4811042
BEIRUT OFFICE
Starco Bldg, Block B
11th Floor
Omar Daouk Street
P.O. Box 14-6137
Mina Al Hosn
Beirut, Lebanon
Tel: +961 1 376 016
Fax: +961 1 376 018
CORE TEAM CONTACTS
Rindala Beydoun
Managing Partner
T: +971 50 553 2609
E: [email protected]
Carlo Pianese
Partner
T:+971 56 603 4543
E: [email protected]
Mothanna El-Gasseer
Managing Partner, Riyadh Office
T:+966 50 628 6942
E: [email protected]

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